Minervini in his new book on investing Trade Like A Stock Market Wizard speaks of a phenomenon called The Lockout which occurs early in a bull market just after reversing out of a bear market. In this period, “the market experiences multiple waves of stocks emerging into new high ground; general pullbacks will be minimal and probably will be contained to 3 to 5 percent from peak to trough. Many inexperienced investors will be looking to buy a pullback that rarely materializes during the initial stage of a new powerful bull market, which from the onset will appear to be overbought.”
Here at the end of a bull market in May 2013, in our 50th month, we have a very similar phenomenon except it is not so pointedly inexperienced investors who are locked out – indeed, more than a few of these have just quietly gone on adding to their pensions and RRSP’s and done quite handily since these passive investments often meet the indices. Now many savvy investors and, more particularly active traders feel locked out: active traders, hedge fund managers, as well as those have just stopped stinging from losses in the market in 2001-2003 and in 2008.