NEW YORK ( TheStreet) -- Is the Stock Market Passing You By? Don't be fooled. Slow down. There are significant risks in rapidly rising equity markets and I don't want you to be a casualty. Recent short sale squeezes and the central bank induced euphoria are only contributing to the problem facing disciplined, conservative investors.Right now, I liken the situation to your typical, congested interstate. As the stock market races to new highs, many investors begin to feel the need for speed and switch from slow moving conservative investments to the faster moving equity investments. Driving in the right lane at the speed limit can be a frustrating experience as you watch faster traffic zip by at high speeds. Equity rallies, particularly mature ones, have the same dangerous, emotional pull on individuals as they tend to change lanes near the end of the highway to capture the time lost by playing it safe along the way. For instance, buyers of Apple ( AAPL) in the last year, who perhaps felt they were plodding along with dividends and interest from bonds, are now full of regret as that company's stock price resembles a pile-up in the left lane. It can be hard to remain disciplined, especially when there seems to be evidence to the contrary. Take the recent meteoric rise of Herbalife ( HLF), from $26 to $46. The jump in price gives the impression something positive is occurring at the company when in reality it's just a short sale squeeze.
These occur when many investors have sold a stock short, betting it will go down. If the stock in fact rises, these investors are forced to cover their bets by buying the stock, driving it further upward. In fact, the recent fall and rise in HLF is just a fight between hedge fund titans. Investors who saw the momentum and got in, were betting on an illusion.
We recommend staying at a comfortable safe speed, and over time you will probably pass those who make the mistake of lead footing it with a lot less anxiety. Unfortunately, they might just be piled up on the left shoulder waiting for tow trucks and EMS vehicles as you slip by to your destination still in one piece. At the time of publication the author had no position in any of the stocks mentioned. Follow Steve Cordasco (@CFNPlan) This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.