The FOMO Chase is on.....
Are We Nearing A Market Top??
In the world of trading, the retail FOMO (fear of missing out) chase is a phenomenon that distinctly separates professional traders from the rest. This topic is particularly relevant now, with Bitcoin soaring to $45k in its impressive bull run and the S&P 500 breaching 4600 territory for the first time since July. The FOMO is palpable, and many are worried they've missed out.
Media and news outlets have been fueling this rally, creating a hype that draws retail investors in, often to buy at the peak. My years in trading have shown me a pattern: when CNBC starts buzzing about a product, it's likely that the movement is nearing its end. I sometimes ponder whether these media pundits are indirectly aiding the big players in providing exit liquidity, coaxing retail investors to buy into the hype, thereby allowing the big players to sell off profitably.
Take a look at some historical instances:
- In 2021, with the Nasdaq well above 16k, CNBC projected 18-20k, but we saw a crash shortly after.
- The same year, as the S&P 500 hit 4800, predictions of it reaching over 5k were rife, yet a crash followed.
- In both 2018 and 2021, CNBC's push for Bitcoin investments coincided with the peaks of its cycles, followed by notable crashes.
- Fast forward to 2023, and the same pattern emerges with Bitcoin. Despite its surge to $45k, there's talk of $100k to $500k valuations. But let's remember, this isn't Bitcoin's first rapid ascent prone to pullbacks.
Now, let’s talk about the S&P 500, which has risen over 12.3% or 505 points in just over a month. Yet, we're hearing talks of a "potential breakout" from CNBC and others. It baffles me – we're witnessing one of the largest short-term surges in years, and now they're coaxing retail investors to jump in at what seems like a market peak or at the best case a bad risk to reward scenario.
I’m no prophet, and the market can always surprise us, but given the historical patterns and probabilities, it seems we're circling back to a familiar scenario – trapping retail investors in a FOMO push near market highs.
I would never presume to tell you how to invest or trade your money; everyone's risk tolerance differs. But consider this a gentle reminder: don’t chase a move you've already missed and be wary of the retail FOMO trap perpetuated by the media.