David Fuller's view

We are too often tempted to pontificate.  This lack of ego control may indicate a need to attract attention, not least to influence others when we have positions which will be affected.  These egregious mistakes are made by all investors from time to time, and radical short to medium-term forecasts can indicate desperation.

Comparatively inexperienced investors may be less prone to this loss of judgement than experienced leveraged traders.  However, they may impede their own learning curve if overly influenced by those who appear to have better insights or at least more experience.

How can we reduce these problems?     

Beware of groupthink, which may feel reassuring but is often a contrary indicator, especially if many of those people are ‘talking their book’. 

Listen to what influential people are saying.  The most efficient way for me to do this is by listening to Bloomberg or CNBC while enjoying a morning workout.  However, I keep a remote close to hand, so that I do not feel assaulted by the repetitious adverts. 

Guests on these programmes can just as easily be wrong rather than right, but they let us know what is going on and help us to have an up-to-date feel for market sentiment.  Whether you agree or disagree with what is being said, check it against the reality of what the markets of interest to you are actually doing.  A good way to do this is by looking at price charts, which most subscribers already do. 

Be alert to sudden market dynamics which can lead to a change in sentiment.  Here is one example which you may recall.  At the beginning of January 2016 I was hoping for an improvement in market sentiment although there had been a loss of upside momentum.  Instead, I was shocked by the opening downward dynamics on the S&P 500 Index (weekly & daily), which were immediately followed by further selling.  This soon became the biggest correction since 2011, although it also proved to be another buying opportunity, albeit from 300 S&P points lower.  Many other stock markets fell much more sharply. 

That recollection probably contributed to three days of mild profit-taking as 2016 ended, so today was going to be interesting for many of us.  It is only one day but so far, so good.  Upside follow through during the rest of this week would be reassuring in terms of avoiding another January downdraft. 

There are a number of reasons for remaining optimistic over at least the next quarter, as this service discussed in December.  I would continue to give the upside the benefit of the doubt, provided that early November low near 2080 is not challenged.