As I see it, CNBC analysts and other talking heads do not instigate such things. The dog wags the tail. They just report chatter they think will sell, but what I think you are seeing is that they also magnify and so distort.
It is not really that people get influenced by talking heads that is important. Sure, this happens of course. But the real movers and shakers aren't listening. They are busy moving and shaking, and that in turn generates the responses that get amplified by the talking heads. There are collateral effects on bystanders like you and me, but don't imagine for a second that this results in significant market movement. We are retailers, and cannot move the markets in any significant or sustained way, even when we operate in a more or less unified fashion.
Also, remember that as sentiment runs to extremes, and particularly as those extremes in sentiment diverge more and more from reality, the probablity of a reversal and backlash increases in like measure.
The crowd is often correct in the middle of trends, but is far and away wrong at the pivot points. And a corollary is that at pivot points, agreement approaches unanimity. IMHO, that is one of the instigating forces driving the pivot: major forces see the opportunity, exploit it to the fullest extent possible, and THAT directly causes the reversal. They know that there are limits to sentiment extremes, and that the capacity of the market to ignore and grossly misinterpret facts is limited. Fear will get displaced by greed, and as that happens, perceptions become clearer and clearer. This drama is played out again and again and again in every market in the world, and always will be, because it inevitably follows from human nature.
T |
