Pullback DRAMA - Retail Traders

A few weeks ago, the stock market experienced a pullback that was a bit sharper on top of a slower retreat.

And DRAMA ensued on FinTwit and CNBC.

The bears were out dancing in the street, promising we would go so much lower. The “uneducated”, I will call them to be polite, were bringing up stock charts that showed a massive, massive dive off a cliff.

It was flat-out ridiculous.

Where does this insanity come from? Why do peoples’ judgments get so clouded when money is involved?

It comes from fear. All these assessments are fear-based, so you can confidently ignore them and speak some truth to crazy emotions.

In order for a massive sell-off to occur in the market, things have to go really bad, really fast. And no such events happened. 

Here’s why talk like this doesn’t bother me and why I think those people have a few things to learn.

Institutions run the market, not retail traders. Institutions don’t sway to their emotions like retail traders do. They are there to make money and put a little more risk than you or I would in certain situations.

Institutions cannot keep making money if stocks keep falling. Especially if there is no reason they should continue to fall further. Institutions will rush in and buy shares.

Why?

Because institutions need volatility and rising and falling stocks to make money consistently. If they don’t see the volatility they need in the market to make money, they will make the volatility to make more money. They have the power to do that, and they do it- like clockwork.

Once you know it's all a bit of a set-up you can manage your emotions and let common sense prevail..

Never underestimate greed on Wall Street. They absolutely cannot fathom not making profits at every opportunity. You can count on them to buy dips and raise prices because THEY MUST make more money.

Guess what happened at the end of last week?

All the losses in the last 2 weeks snapped back up in 2 days.

This is how the stock market works. It goes up, it goes down, and then it goes back up. Whether we freak out or not. :)