John Q. Public is getting in the game

There was an interesting article in the NYTimes on Saturday about how small investors are moving back into the market. Here is the article.

"There's a lot of bargains out there", said David Avery of Englewood, N.J., who has moved about $25,000 from savings accounts to stocks"

Now after the market has run up 32% since it's March lows the public is starting to get into the market.  Can this be marking the top? 

But this could be the start of the public getting behind this rally.  The article mentions the infamous "Money on the sidelines", to the tune of $3.7 trillion in Money Market funds.  This money on the sideline has been talked about at since the bear market started, this idea that there is money waiting to be thrown back into the markets.  To the bulls this is the knight in shinning amour, this money on the sideline will come in and start another leg of the rally, saving the day. 

But the article even mentions what happens when most average investors aka the public start buying into the market

"Other investors said in interviews that they had made familiar mistakes: waiting to long to buy, getting in at the top of a small peak, bailing out just before a falling stock turned around"

So this clearly shows that  the average investor is usually wrong.  It also supports the "Odd Lot Theory". 

The most important thing to gain from this article is that it gives you a great insight into the psychology of the investor.  Right now the market is up 32% from it's lows and the average investor sees it as a buy, hmm something to think about.  But they aren't that bullish, one person quoted in the article says

"We all have the frear of God in us now, we were all sedcuced into easy money and then, when the markets began to tank, I think everyone become very cautious"

 So there is still fear in this market, but more importantly this shows  that the new money being pumped into the market has a much tighter leash then the last time these investors started pouring money into the market.  So when the market starts to get bad, selling will be quick.  

This could be phase one, the above average investor is now getting into the market.  Phase two will be the dumb money, when there everyone thinks it's a new bull market.  Fear will be gone from the market and this will be the like Salmon Season for the bears!!!!