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Retail traders going long on the US stock market

SPX News by Simon Kazinsky on 07:53 Octuber 11, 2018 EST
Just as the market starts to finally provide proper signals of weakness and breaking important medium term supports retail traders venture themselves into catching a falling knife, fighting the strong trend and picking a bottom.

The main US indices lost between 3 and 4 per cent of their value in a single session just yesterday, the worst single day since February, but mum and pa' know better and have just had enough, they can't wait to buy into this one in a lifetime opportunity with both hands. At the same time stocks were heading south during Wednesday session, data from several brokers reveal a massive swing on the number of their clients flocking into long bets.

As an example the ratio of long/short traders for one of the major brokers has gone from 33/66 on Wednesday to 50/50 at the time of writing on early Thursday New York time.

Other broker reports the ratio of clients long versus short stands at 63/37.

Retail traders are notoriously wrong most of the time and although the market may now be temporarily oversold the down trend is likely to continue.