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Did you sell everything today? Psychology and stupidity of retail investors.

Did you join the retail investors today and sold everything? If you are wondering what drove the market today, you no longer have to. It was retail investors according to Blomberg and data from brokerage houses and their order flow reports. Today’s trading in the stock market was a typical view into the soul of mom and pops acting irrationally, and I hope, I really do, that you didn’t join them. If you read my newsletters, I wrote, many times, that the selling is not fundamentally justified. Not at this level and this speed. What we have witnessed was a pure irrational panic selling. Nothing more.

What has happened? Retail investors simply dumped their stocks just to see them rebound and rally without them when big money picked the cheap stocks and bought them.

SPX retail investors selloff

It was the retail investors who were left holding the bag behind left behind without their shares. Now, unless the market revisits those lows, they will be buying back at a lot higher prices than they sold. A typical retail stupidity of buying high, selling low.

This chart shows how retail investors’ selling gained speed in the morning and at noon, institutions picked up the cheap stocks:

retail investors imbalance

What’s next?


As you can see, as of this writing the SPX futures are down again (down -1.06%) and that is typical for bounces like the one we saw today:

SPX futures

We need to see a follow-through to call this a reversal and recovery. If the price continues lower without any stops, the end is still not here. If we start chop around or even see another green candle with a higher closing price than today’s price, we may see it as a bottoming process. But even with that, there is a risk of a dead cat bounce:

SPX dead cat bounce

To tell for sure, we still need to wait before we can engage in full-scale trading. In the meantime, I rolled a few strangles that needed to go lower as they were hurting my buying power, and purchased a few depressed stocks such as Netflix (NFLX), and I plan on adding more SNOW, TSLA, APPL, and AMZN, so, if you joined the suckers selling today, keep selling. I am buying.

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