Bull markets end when there are no more buyers

Bull markets end when there are no more buyers.

Buyer exhaustion doesn't appear to have been reached yet. I think one of the reasons is each time buyers turn into sellers and decide this market run is over, they then look at their investment alternatives (cash and bonds) and run back into the market justifying or telling themselves the Fed has got their back.

Each move higher saps the strength of buyers. At some point, buyers are bought out and are then caught in the next pullback buying the dip (because that has always worked before). They then get trapped when the market falls again and they double up. Not because they believe the market is a good buy, but because they have always won when they bought the dip. When the market fails to perform on the upside, they find themselves fully invested (or in the case of traders quadrupled up...initial position in the money...purchase at the high chasing momentum...adding when the markets falls 5% because it is a BTD market...putting the fourth position on when market down 10%) and now find the market down 15%. This is serious gut check time. Do they acknowledge they have been wrong and cut their positions, or do they gamble and quadruple up?

Whatever the case, it feels as though the market knows their mind, their weaknesses and their positions, and it is able to prey upon all of those things, forcing them into bad decisions. Welcome to the humbling.

Incredibly Good Piece

This was an incredibly good piece highlighting the bull and the bear arguments.

http://pensionpartners.com/blog/?p=253 

Bernard Baruch on Bears

Bears can make money only if the bulls push up stocks to where they are overpriced and unsound.

Bulls always have been more popular than bears in this country because optimism is so strong a part of our heritage. Still, over-optimism is capably of doing more damage than pessimism since caution tends to be thrown aside.

To enjoy the advantages of a free market, one must have both buyers and sellers, both bulls and bears. A market without bears would be like a nation without a free press. There would be no one to criticize and restrain the false optimism that always leads to disaster.

Quote at the beginning of "The Art of Short Selling."

How Long Can I Stand Being In Cash?

How long can I stand being in cash, while this market rockets off without me?

That is the question all those investors who fled for the sidelines are asking themselves.

This market is shaking the trees and you can bet your bottom dollar, that when most of the bears capitulate, it is time to take it down again.