Legal disclaimer: The following post should be considered as entertainment and not investment advice. For investment decisions, please listen to the central bankers of your country.
The stock market is a ‘market’ full of stocks. A large number of stocks are being bought and sold there.
Most ordinary people have been trained to buy ‘index funds’ or index ETFs in this market, and not touch individual stocks (“too dangerous”). That advice is similar to asking people to buy one spoon from each of 500 different ice- creams in the store and mix them, because “some brands of ice-creams may have e. coli”.
An index ETF is the weighted collection of many stocks. For example, $SPX = aIBM + b AAPL + c* INTC + …… (goes on for 500 numbers). The weights a, b, c,….etc are fixed numbers. So, if everyone buys index funds, that should make all components IBM, AAPL, etc. go up or down at the same rate, right?
They do not, because “smart money” sells selected stocks in the rally. “Smart money” means those with plenty of stocks and ability to do homework. For one reason or another, they came to dislike one or other stock. That does not mean they are right, but they tend to be more correct than others.
Why do they prefer to sell in the rally? This point cannot be understood without having the shocking experience of trying to sell large amount of stocks in a decline and not getting a bid.
Long story short, do you see anything unusual below?
Happy Halloween !!
(The idea of this post was borrowed from here.)