So was this is? Is the widely awaited top in? I don't think so. I mentioned before that rarely do IT tops get made with a large gap down like this. This is more indicative of "wall of worry" behavior. Only in hindsight will we know if I'm right or not but what I do know is that there was a bear party today. On the blogs and message boards I've neven seen such jubilation from traders like this in a long time. This proves my point that the trading community has been fading the rally all along. I like to go to stocktwits.com to check the pulse of the gamblers...er....trading community. They have a list of the top tickers that are twitted the most. Today the FAZ to FAS ratio was about 3.7:1 showing that traders were pressing the downside rather than buying the dip. FAZ has been the number 1 ticker by far for the past month. So, despite the fact that this ETF had probably the worst performance of any ETF that you could buy, it was the most popular selection for traders! It seems to me a clear case of chasing yesterday's bear market. This was the same sort of thing that happened after the dot com bubble collapsed...people kept chasing former tech winners with futility. Sure, some of them caught a nice counter trend rebound but we all know the ending to that story.
I've noticed that quite a few bears are pressing their bets today instead of using this dip as an opportunity to cover and recoup the losses they have taken. A lot of them chased this gap down today as well and are willing to hold FAZ and SRS overnight. After the massive damage these bear ETFs have caused you figure that traders would be gunshy but no! What hubris! I don't think Mr. Market will think too kindly of this. It also shows the gambling mentality that most traders have. These 2x and 3x sector etfs are prone to large gaps in either direction which makes risk management difficult to employ effectively if you hold overnight.
I mentioned that I wanted to see how bears would react if the market had a significant pullback and I got my answer. Clearly they are pressing believing that the top is in with no respect for the upside. That doesn't bode well for them and suggests the market will turn higher to at least test the recent highs in due time.
Anyone who top ticked at the 875 level on Friday and held over the weekend must feel very happy about themselves. But I'm affraid this may simply re-inforce a bad behavior that they will eventually get punished for.
Ok that's enough blabing...I'm going to lay low now as I promised!
No comments:
Post a Comment