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When you hear the expression "fear of missing out," better known as FOMO, aside from images of jumping out of planes or bungee jumping (if that's still a thing), do you ever think of investing?
Well, that's exactly what's going on with the market right now – FOMO. However, only a month ago, professionals like me were hedging against this market. And for good reason.
It really was the smart money move to make at the time. Not only had the yield curve inverted, but earnings reports were getting ready to hit the wires, and geopolitical tensions like the trade war were making headlines right and left.
The risks were stacking up.
Then, within a week or so, things changed faster than a set of tires at the Indianapolis Speedway on Memorial Day weekend. The bond market gave forgiveness with higher rates. Earnings beat lowered expectations, but nonetheless still beat them. The trade war… well, it's still hanging in the balances, but moving towards something that resembles a deal.
We're now ratcheting to new highs daily.
Getting back to the professionals, it looks like hedge funds and active managers are now moving from the sidelines back into stocks, which is fueling the current rally. The chart I'm going to be showing you in a minute is one representation of this activity.
Overall, the continued feeling of FOMO should be considered a new catalyst for the market to move higher, which is one of the reasons that I've been repeating one of my Ten Commandments of Trading, "Don't fight the tape!"
About the Author
Chris Johnson is a quant - he's obsessed with building and perfecting mathematical models that allow him to predict, with startling accuracy, the direction of the markets, entire sectors, and individual securities. For the last year, he's been researching and building a new system that lets him move swiftly in and out of the hottest stocks in the market for life-changing gains - entirely on his own terms. The results of his newly-minted Night Trader system are nothing short of amazing.
Chris also contributes to Money Morning as the Quant Analysis Specialist.