The number of individuals investing in the market today matches that of, and will soon exceed, the levels seen in 2008 (over 61% are playing the market). Even a significant portion of individuals over the age of 85 are nearly fully invested. This week's bullish reading has finally reached the 50 mark. As a result, we now have five consecutive weeks of bullish readings surpassing their historical average of 38.5 (having dropped from 39), after trading below this threshold for 18 months.
The story below also illustrates the mindset of today’s individuals.
The scarcity of sriracha hot chili sauce has led to a surge in prices, reaching over $70 per bottle on the secondary market. The ongoing shortage, lasting for more than a year, has created a high demand for the popular sauce. Resellers are taking advantage of the situation, with some selling bottles for even higher prices, such as $100 on Amazon and $70 on eBay. The issue highlights both the strong consumer demand for sriracha and the prolonged duration of the shortage. https://www.foxbusiness.com/lifestyle/s ... -70-bottle
Essentially, the collective mentality deceives the mind by misclassifying desires as needs. Once this happens, price becomes irrelevant, at least until individuals exhaust their financial resources. Now, let's apply this analogy to the markets. The belief is that AI will revolutionize the world, and investing in the markets is the surefire way to make money. Consequently, people dive in and buy, disregarding the price, convinced that it will continue to rise indefinitely. This resembles one of the earliest historical bubbles, the tulip mania.
This line of thinking establishes a foundation for a new way of thinking, making it easier to fall prey to the "it's different now" theory. It also accelerates feelings of euphoria and joy, which will inevitably fuel intense levels of fear and panic when things take a turn for the worse.
History may not repeat itself exactly, but it often comes dangerously close. A highly plausible scenario is that the AI sector will experience a severe decline while cyclical stocks and key commodities put in higher lows during the next pullback.
If you are a low to medium-risk investor, it is advisable to proactively reduce a significant portion of your long positions in any stocks that are currently experiencing or have been part of the AI feeding frenzy mania.
With Bullish levels rising, it's a distinct possibility now that they could hit the 55 level, which by default suggests that panic levels will go through the roof when the outlook shifts. And then it will be time to take action.
Interesting chart: Long-Term Graph of the BDI (BALTC DRY INDEX)
Presenting random data for individuals who appreciate scrutinizing long-term charts and exploring fascinating patterns!
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