Fear of missing out is holding investors in what increasingly appears to be an overbought stock market.
Technology stocks are leading the march to new highs in market indexes.Traders work on the floor at the New York Stock Exchange, November 4, 2019.It's not very exciting, but the market keeps advancing almost every day. The S&P has been up 10 of the 13 trading days this month, yet market technicians do not seem concerned the market is getting too far ahead of itself.
"This market is grinding higher — yes, it's overbought, but markets that get overbought can stay overbought for an extended period," Craig Johnson, technical market strategist for Piper Jaffray, said. "This is the exact opposite of what we saw last year. The Fed is now easing or neutral, and they are expanding their balance sheet. Trade war concerns are subsiding. We are not breaking down. We are breaking out.
An additional factor is moving the market: fear of missing out. "Of the last 20 trading sessions, 15 experienced a positive closing tick, indicative of money inflows," JC O'Hara, chief market technician at MKM Partners, wrote in a note today. Dan Wantrobski, technical strategist at Janney Montgomery Scott, wrote in a recent note: "[W]e realize that 'FOMO' can trigger a pain trade higher still as we head into year-end."The top 10 tech stocks, in particular, have had outsized gains that are dragging the S&P to new highs. With the S&P 500 up 2.6% in November, seven of the largest 10 technology stocks are outperforming the index, and only one — Cisco — is down on the month.
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