Investor sentiment swings from optimism to pessimism and back again continuously. Sometimes these emotional swings attach themselves to individual stocks, sometimes they attach themselves asset classes, technologies or even counties. The emotional swings are what makes investing so difficult. There are times when you can keep your head and make rational decisions and you make a buck. There are other times you keep your head and you get run over by the crowd going on an emotional bender and you lose a buck. Then there are times when you get caught up in an investment fad and you make decisions along with the crowd. These are difficult circumstances to recognize in real-time as the fundamental narrative tends to support the price action, even as that price action strays away from intrinsic valuation. Under these circumstances, you tend to make a buck early on but give back much or all of those gains as price turns before the data does.
