I’ve spent more than two decades studying human behavior every single day.
It’s not the market that’s crazy. It’s the people.
Humans make irrational decisions, especially under stress. And there’s no environment that exposes those flaws more than when money is on the line.
At TrendLabs, that’s our edge: finding the disconnect between what people think is happening and what’s actually happening.
That’s where the opportunity lives. We’re not trying to be the smartest ones in the room. We just need to be slightly less stupid.
‘The Coming Debt Emergency’
It’s hard to ignore the latest cover of The Economist cover warning about a “debt emergency.”
But let’s be honest: Do real emergencies in the market usually happen after the journalists tell you they’re coming?
Or are these stories just another distraction, more noise meant to keep investors focused on fear instead of the actual trend?
In my experience, it’s not the magazine cover alone that’s the contrarian signal.
It’s the combination of sensational headlines — dressed up as journalism but designed to sell gossip — and the divergence between those stories and what’s actually happening in the market.
It’s not one or the other. It’s both. That’s when you know you’re being fed a narrative instead of data.
Nasdaq New All-time High
The Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100, just closed the week at its highest level in history.
That’s not something you see in downtrends. Those are the kinds of things you see in bull markets.
Keep in mind that more than half of the Nasdaq-100 — about 54% — is made up of Technology stocks. That’s the leadership group.
And it’s doing exactly what leaders do. In more than 100 years of U.S. bull markets, the Technology sector has led and outperformed in nearly all of them. This cycle is no different.
Tech just hit new all-time highs relative to the S&P 500 this week:
Earlier this week, we talked about understanding your time horizon — how markets can look very different depending on whether you’re zoomed in or zoomed out.
What these charts are showing is the bigger picture: a healthy, long-term uptrend being driven by the same type of leadership that’s powered nearly every major bull market before it.
Stocks Are Overvalued
With stocks in a bull market, nothing makes me happier than watching journalists try to scare people — especially the ones masquerading as economists.
That combo has always been one of the best contrarian indicators out there.
And here’s how individual investors are reacting. According to the latest AAII Sentiment Survey, there are now more bears than bulls — again.
In fact, bearish sentiment just hit 46%, the highest since early September. Bullish sentiment? Only 33%, also the lowest since September.
When asked about valuations, only 6% of investors said they think stocks are undervalued.
Six percent!
Meanwhile, the major indexes are still sitting near record highs.
Yes, we’ve seen some short-term choppiness during this correction — that’s normal. But whenever you’re unsure, just zoom out.
And what do we see when we do that? A long-term uptrend fueled by gloom and doom headlines, angry crowds, and hysterical magazine covers.
That’s not a warning sign. That’s rocket fuel.
This Week in Everybody’s Wrong
On Monday, we talked about how every fiat currency in the world is failing the test.
The U.S. Dollar is just the last domino.
And Gold is much more than a commodity.
On Tuesday, we looked for the sucker at the table.
Our job is to identify who’s most vulnerable, then take full advantage.
We’re here to make money, and awareness pays.
On Wednesday, we revisited one of those old-school Technical Analysis sayings we love so much around here.
“The bigger the base, the higher in space.”
On Thursday, we saw short sellers in shambles.
They keep clinging to their fairy tales about recessions and market crashes instead of just participating in the bull market like normal people.
These folks are bad at their jobs, and we’re grateful for them.
On Friday, we explored the line between a healthy pause and a real problem.
When we talk about this current market correction, we’re doing it in the context of much larger, longer-term uptrends in equities.
So, do you know your time horizon?
On Saturday, we welcomed back Grant Hawkridge from Down Under to break down what’s really happening in the stock market right now.
First you need to know your environment.
Then you must ignore the noise and trust the trend.
Have a great Sunday.
We’ll see you Monday morning…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs