Perhaps the most over-used phrase that can be heard on trading floors in the past 12 months is “it’s got to pull back from here, surely”.

Meanwhile the tally of record closing and intraday highs grows.

The Dow Jones Industrial Average has pushed through 23,000, the S&P 500 above 2550, the Tech-focused Nasdaq composite has bettered 6100 and the German DAX has smashed through 13,000.

As a group, they have registered nearly 175 fresh record highs already this year, a tally that could increase further in the fourth quarter.

Furthermore, the UK UK Index sits just shy of June’s 7600 record high, showing interest in making another new record itself.

Historical precedents are easily pointed to for pre-crash comparisons of overvaluation to support the narrative for a correction.

But much like the football chant ‘sing when you’re winning, you only sing when you’re winning’, the general narrative from commentators is that things have gone too far. Even the 2017 Nobel Prize for Economics winner Richard Thaler has stated that he “can’t understand why markets keep going up.”

However, this has not come from those riding the trend. Perhaps because the former tried to call the top a while back, now sitting on losing positions and in need of a correction to ease the pain.

Or perhaps they missed the rally and, for fear of the end being just around the corner, don’t dare to buy in now.

“Hope is not a trading strategy”

Interestingly, the ‘markets’ have been at over-egged levels for days, weeks, even months, and even longer according to some commentators.

In reality, those who missed out probably only want to see a pullback for an opportunity to jump on-board what they hope is the next leg higher of a trend that still has at least some legs. After all, it’s proved costly not being on board.

Look how far markets have come in the past 12 months. Remember the Dow at 20K, 21K, 22K?

Remember the DAX at 11K and the UK Index at 7100? They can’t all be desperate to trade short and profit from a decline.

Anyway, why does the market ‘have’ to drop? There’s no obligation.

It isn’t something tangible that follows orders or crumbles under negative commentary despite occasionally falling foul of spikes and algorithms.

It’s a complex ecosystem of fear, greed and psychology, driven by investor appetite and how much more one party is prepared to pay to own something in the hope that it will rise versus how much someone else is prepared to sell it.

If the former is more desperate to own what the latter is selling, he’ll have to offer a higher price. If the latter is more desperate to offload what the former wants to buy, he’ll have to accept a lower price.

Until the balance of risk appetite changes, the trend, either up or down, can continue.