The Psychology of the S&P 500 Price

• Posted by Greg Harmon
• on April 21st, 2016

This Dilbert comic is right on point to the built in psychology of humans. Not just for things like the end of the world but for stock markets as well. Big round numbers bring out a lot of fear and crazy ideas. But the also create points where there is some stickiness in the market.

It is appropriate today for two reasons. First the S&P 500 is back at one of this big round numbers. Not 2000 but 2100. And after a 300 point rise in the last two months I am still getting comments about it being almost time to get short the market. Ummm, 2 months straight up looks like an uptrend to me, why short now? Let’s wait for it to start going lower (bears are reading this last sentence as a certain event).

But in fairness there is a strong possibility that bulls beating their chest in anticipation of new all-time highs may also be disappointed. That stickiness at 2100 should be apparent to everyone. How long did the market sit at about 2100 before the pullbacks in August and then in January? So it is entirely possible that both bulls and bears get disappointed as the S&P 500 churns away at 2100 for some time again.

All we can do is watch, look for opportunities and manage risk. Oh and the second reason that comic is appropriate? Scott Adams liked and commented on one of my replies to him yesterday. Yes we all look for small pieces of fame. Have a great day.

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