Who Is Buying The Market Here?

By All About Trends

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Over the weekend, one of our paying subscribers asked us:

Who Is Buying The Market Here?

Good question if you ask us. The true answer on the surface is that its a market question nobody can answer. However under the surface?

We'd rather talk about the chemical make up of the market and how emotional states come into play because the market is full of emotions and people making decisions off of those emotional states good and bad so lets talk about that a bit.

Keep in mind for every buyer here has to be a seller and every seller a buyer.

If you subscribe to the theory that Wall Street sells greed and buys fear to which we do then when markets get pummeled for months on end (Sept Oct Nov 2012) at those lows just who does Nervous Nellie think she is selling to AFTER the damage has already been done.

At extremes and AFTER a move has already been done stocks move from weak emotional hands into the strong hands. At peaks it's the opposite, stocks move out of the strong hands (those who bought Nervous Nellie's fear) and into the hands of the Greedy Gus' (here too greed is an emotional state) who emotionally are weak too in a sense because they are not in control of their emotions because they buy out of fear of missing it AFTER they already missed it.

Think like the house and the house always has the edge and this is the house's edge — playing off the fears of average investors if you will and always AFTER a move has already been made.

So as to who is buying here? Well it's not smart money because you don't get coined being smart by buying AFTER a market has already ran for 4 months. The buyers right now are mostly the retail investors because the fear of missing it comes in to play AFTER they already missed it.

The other person who is buying here out of fear are short sellers who are covering their short sells out of fear of more losses AFTER they've already lost.

Again, it's all about emotional states and we try really hard around here to keep our subscribers on an even keel.

We've said it before and we'll say it again – You have to sell your peanuts while the circus is in town (when the circus leaves town who are you going to sell your peanuts to anyway — the crowd is gone) which is another way of saying get out while the getting is good.

The other thing that comes into play here is impressions. What we mean by that is Wall Street sometimes gives the impression that everything is fine and dandy by just moving a few key select names that make up the biggest percentages of the indexes. IBM alone makes up 13% of the DOW, GOOG is 8% of the NASDAQ comp so you see the market makers (and tradebots) can move those stocks (and every time they do they suck in the little emotional Greedy Gus guy) to give the impression everything is great when it's really not all that great. This is called PAINTING THE TAPE.

As for the indexes here with regards to our trading style here it's really simple:

We Buy Trend Channel Support And Sell Trend Channel Resistance

See Trend channel support? It's the lower Green line. That is where we buy the market.

ALWAYS ALLOW STOCKS TO COME TO YOU!

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