Posted on Saturday, December 16th, 2017

Be greedy when others are fearful and fearful when others are greedy. – Warren Buffett

The most important aspect of investing to master is the psychology of investing. If one is not aware of one’s emotions surrounding money and gains and losses one can never master the art of investing. The parabolic price rise and constant chatter surrounding the rise of bitcoin has all of the hallmarks of a mania. The bitcoin mania has pundits and media types all aflutter. That emotion works its way into mainstream investing.

We are seeing very large money flows into the market as investors see the big returns of bitcoin and want some for themselves. That reminds us of another Warren Buffett quote. “What the wise man does in the beginning the fool does in the end.” According to CNBC, ETF inflows had their second biggest week in history. We believe that the parabolic rise in the price of bitcoin and the mania surrounding it has driven investors to an extreme in bullishness. That has led to the S&P 500 becoming overbought (According to its RSI) to a level not seen since 1995. Investors are plowing money into stocks excited by bitcoin’s parabolic rise. The FOMO Fear of Missing Out has investors, perhaps, getting in a little over their heads.

For months we have mentioned the idea that the market could stall at the 2666 level on the S&P 500. We made mention of the fact that 2666 is just about 4 times the bottom print in March of 2009 of 666 on the S&P 500. Also, our thesis included that this number, and its biblical significance, would play a part in Wall Street traders psychology and in Quantitative Funds computer programs. For those of you who thought we were nuts, by way of Zero Hedge, comes a chart which shows that the market has struggled with multiples of 666 since March of 2009. The S&P 500 when hitting 2x and 3x the low of 666 has spent the next 18-24 months in a consolidation pattern. Signposts like this along the way are good spots for investors to take a respite and reflect on how far we have come and whether the trend should continue. 2018 may be a Year of Reflection.



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I  think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd  Blankfein

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Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.