Given that the broad global rally off of unsustainable negative
sentiment has ground on much longer than many (my hand is raised)
originally thought, it is logical to assume that this condition may be
challenging many peoples' resolve. We track 'dumb/smart money'
sentiment nearly every week in NFTRH, and the
reason is that despite technicals and fundamentals, the market will only
change course in a significant way when the psychological profile is
allows for it. More and more, it looks like extremes will need to be
registered, perhaps with the intensity of Q4, 2008 to Q1, 2009 only in
the opposite direction. They are on their way.

NFTRH82 highlighted gold sector
technicals and fundamentals in relation to those of the broad market,
charted up other markets, indicators and stocks, and reviewed the
updated dumb/smart sentiment picture. But in the middle of all this,
the following bit of psychological navel gazing found its way in there
as well, perhaps as a way to work through the fact that the market has
not yet conformed to conclusions that the writer 'thinks' he knows are solid ones.
🙂

Here is a secret; none of us has the divine right to the
answers. To ultimately win at this sometimes manic game, we must employ
a wide spectrum of technical and fundamental tools, but also be aware
of sentiment and psychology both from a collective standpoint and a very
personal one as well. In other words, know our competitors and even
more importantly, know ourselves.

Market Psychology

At the risk
of exposing myself as the psychologist wannabe that I am (there are
multiple mental health professionals in the subscriber base), let’s
think about the general [psychological] profile currently in play. Many
of us are micromanaging the massive rally off of the bottom of just
over a year ago. Some, like NFTRH are
micromanaging a would-be top. Others are going with the bullish flow,
secure in the reinforcement of ever increasing positive sentiment.
Still others are sitting sidelines, having been out since compelling
downside sentiment forced them out in preservation of their sanity. I
would venture that the market is wearing on a high percentage of
people’s nerves.

As a currently bearish newsletter writer, I have
to tell you about something that makes me uneasy regarding my stance,
short term. As part of the bus tours around Manhattan my family,
friends and I enjoyed last week, we were taken through the Wall Street
area among many other places – the memorials at the church at Ground
Zero brought me tears and a rush of returning memories – we went through
Wall Street twice. Each time, different tour guides made cracks about
the crooks there and all the money that people lost. My thought was
‘dude… where have you been for the last year?’ with regard to the rally.
Maybe when the tour companies drop that shtick the rally will be ready
to roll over.

Anyway, a micromanaged rally is not likely to end
on cue. That is one reason NFTRH81
noted that rallies don’t usually end on any given alarming news item.
Dubai? Greece? Goldman/Merrill? It is all good until one day, after
more cementing of perceptions, it no longer is. But the rally will not
end logically and in a nice neat manner in which bears can simply climb
aboard and short to the high heavens. Watching them scurry to cover on
Friday afternoons is almost becoming comical, and the market is feeding
on that.

This is why it is imperative to double check our own
individual psychological profiles so that we thoroughly know who we are
as market participants before deploying capital. This beast does not
care about you or me. All of that said, I am personally attempting to
employ the opposite strategy from that which I used late 2008 and early
2009; I am trying to remain cautious as opposed to brave. After last
year’s gains, I have been in ‘preserve capital’ mode for what seems like
an eternity, while holding a precious metals core-plus.

The
market wants me to feel like it is an eternity because it wants me to
become impatient and make a mistake. The market wants me to take my eye
off the ball either through fatigue or greed or some other screw up.
Ah, but I have a secret weapon; I get to sit down and write about the
current market situation each weekend and work through my thoughts after
the dust settles on a given trading week.

Nothing has changed
for me or for NFTRH
with the exception that the stance contrary to hope and greed has not
yet come to fruition like the one contrary the angst and fear of a year
ago did. I’ve got time. Not only that, but things are going better for
me personally now than they were a year ago and that helps me remain
focused, as opposed to dealing with vulnerabilities, which can manifest
as additional mental noise.

I will remain strong in my
convictions but only so far as the work that I do tells me to be so. We
will not institutionalize negativity, bearishness or fear of the future
here at NFTRH.
What we will do is make an ongoing honest attempt to be on the right
side of the macro trade, and if proved wrong, admit it and move on with a
new course.

So, another important aspect of good personal market
psychology is the ability to admit when we are wrong. It happens to
the best of ‘em and it will happen to each and every one us; every last
subscriber and the letter writer for sure. As of now however, I see no
sign whatsoever that a cautious stance is wrong in any picture beyond
the immediate manic bullishness. —http:www.biiwii.blogspot.com