We are soon going to see what this market is made of. There's still plenty of skeptics out there as I've been duly noting. Bearishly inclinded traders, who have been nothing but wrong in their calls during the past 6 weeks are not very respectful of the upside potential of the market given it's 6 week run. At any hint of weakness they are jumping in with both feet only to get burned. Everyone is calling for a 10% pullback even the optimists. Well, I strongly suspect if we get the 10% pullback there will be another 10% pullback shortly after that.
I mentioned how this rally reminds me of the March 2003 rally. If that's the case pullbacks should be limited to no more than 5-6% as was the case back then. The market is never meant to be obvious and the obvious senario right now is a 10% pullback leading to another run higher. Don't count on this playing out.
Anyone who is using some sort of a IT momentum indicator to time the market could also get badly whipsawed if this rally plays out like March 2003 because on the dips it caused these momentum indicators to roll over from very overbought levels triggering short signals only to reverse higher and get overbought again. This is why paying attention to fundamentals and market action (smart money, dumb money behavior) is more important than just blindly following indicators.
No comments:
Post a Comment