The fear of missing out is what drives today's market. What we are seeing is a fundamental shift in market behavior - a previously unseen manner of movement, and it all comes down to technology - and psychology. Technopsycho - maybe.
Fomo - The Key Market Driver
Technical analysis was born in a different age: one in which technology was not so abundant, and the Average Joe did not have access to the markets. In those days, people spent years studying how the market worked, and they always had more sense than money.
Today, however, there are so many people with more money than sense, and they have access to the markets - through their mobile phones and computers. With so much money pouring into the markets it is IMPOSSIBLE for the markets to behave in the same way that it previously did.
What Does This Mean For Technical Analysis?
Technical analysis will have to take a back seat. In fact it may be altogether obsolete. Fundamentals have already been ignored, and will continue to in that way. An example is the lack of correlation between earnings and price in certain stocks like Tesla, Nvidia, and Google.
All that matters is whether more people are buying the stock - and they generally do because: who wants to miss out on a chance to make a lot of money?
The Underlying Cause
Information has become a lot more available today than it has ever been before. Social media plays a huge role in this because more people have access to market information: they become aware of market movements and opportunities.
Granted, the information may be of lesser quality, but the share volume outweighs any effects of the lack of quality.
High Volume+Low Quality=Frenzy
This frenzy, which starts with the average person, also affects institutions; they too do not want to be left behind, and so they jump in. They typically jump in with huge funds, and this creates an even more pronounced effect.
All previous highs and lows will be broken.
Stronger moves will be seen.
Even the most unexpected assets will make major moves.
Markets will react in untypical ways.
New champions will be made.
More money will be made.
Bubbles will be formed more frequently, and will last longer. These days people talk about an everything bubble, and they predict that it will pop really soon, with apocalyptic results. Perhaps they are right.
But that will not stop the trend; we will likely see more everything bubbles, and they will likely come more frequently because as soon as another asset starts to trend, the Fear Of Missing Out takes hold, and we are knee deep in another frenzy.
Key Points:
Fear of missing out can traditionally be singled out as a bad thing; a wrong motive for staking money in any asset. But as long as social media continues to play a big part in investor behavior this will continue. Wrong is the new good, and "just because everyone is doing it" is now a good reason to do as well. There is a certain safety in numbers, and investing is a numbers' game.
