I mentioned in my last post how AAII sentiment is 2:1 bulls vs. bears. The last time this happened was mid December 2009. The market still managed to go up for the next couple of weeks running over the top pickers but all gains and then some were given up come early February. It wouldn't surprise me to see something like that happen again. Despite the recent giddiness in AAII sentiment, sentiment as measured by Rydex traders is not confirming which means few market timing traders are embracing this rally and that suggests there's a good chance that still more upside is in store here....probably one last good push higher is still in the cards.
If you go by the motto of this blog, the way to create maximum pain would be a breakout above1130. I'm not just talking about a 5 point breakout. I'm talking about a clean, solid 20 point breakout. That would without a doubt capitulate whatever bag holding permabears are out there who are no doubt praying that the top end of the trading range will hold. At the same time it will bring in technical buying from the butt sniffers who chase breakouts, breakdowns, head & shoulders patters ect. At that point, the market would be very vulnerable to a set back because it would likely be extremely overbought with giddy sentiment, weak longs and little short interest. Maybe I'm over analyzing this but I think this has a decent chance of playing out. Regardless, I'll be watching market action for clues as to how this thing will play out.
Browsing through the various trading (permabear) blogs recently I got a sense of tremendous frustration. I call the retail trading community permabears because that's what the typical retail trader is....a permabear. It's amazing how these clowns call themselves "traders" when they have such an unshakable bearish bias. I read just now about how one guy refuses to sell his long term puts because of his bias. What a sucker. I say this not because he's bearish but because he actually admits to being biasedly bearish. There's a big difference in that. By being biased in your trading you are attempting to profit on what you personally believe the market should do instead of what the market wants to do. That's a recipe for bankruptcy. The dual bear markets of the past 10 years has made most traders view the market through a dark tinted lens which causes them to stubbornly overplay the bear side and when they actually try to play the bull side their conviction level is paper thin...all it takes is a slight pullback to send them running for the hills back into their bear caves.
I can't find any popular retail trading/investing blogs that have a bullish slant to them. Every blog out there that is popular amongst the ilk has a bearish bias. It's just a sign of the times. Given history clearly shows that the typical retail investor/trader has an atrocious track record I can't help but think that somehow, someway there will be a long term bullish resolution to all of this and the permabears will once again be foiled for umpteenth time in the past 30+ years.
If the bears turn out to be right, then we will probably see the market collapse in a way whereby most of the retail permabear ilk doesn’t profit from it. That would probably entail a very sudden and steep collapse just prior to the point of maximum bear capitulation due to a grinding cyclical bull market. The flash crash in May is a good template. Very few bears survived that relentless move in March and April to profit from the flash crash and if they managed to be positioned short they likely covered far, far too early.
A lot of the retail ilk who for several months have been spewing bearish arguments such as high debt/GDP levels, a pending commercial real estate collapse (remember that one?), a PPT manipulated market and whatever else, have gone broke or just a bouts. At the end of the day it's all about whether you have made or lost money. Nothing else matters and from I can see most of these self righteous bears have lost a ton.
Exactly, it's not whether you are right or wrong, but are you profitable at the end of the day. Look at all the bears who were right calling the dot com bubble only got their face riped off until NASDAQ got some extremely valued. My father's friend's husband is a good example of that, this guy went all-in short early on 1999 only got his balls torn off and a divorce in the card at the end.
ReplyDeleteyup...timing is everything. being early is often the same as being outright wrong. This is why my way of investing/trading is such that if I have an outlook on the market or a stock, the action of the market/stock needs to agree with it.
ReplyDeleteGuys like your father's friend's husband is a perfect example of telling the market what it should do instead of listening/respecting what the market wants to do. What he did is the same as someone standing in front of an oncomming speeding mach truck with his hand out saying "stop your going too fast!"....splat is often the end result and bears learned this the hard way last year and this year.
The bears definitely got their teeth kicked in this Monday. Let's see how long the bulls will torture them until they all give in.
ReplyDeleteya, it was a rather unmerciful slaughter. Market is now quite overbought ST so it wouldn't suprise me if Tuesday is flat or down but when the market closes near the HOD making a new rally high it tells you there's more work to be done on the upside eventually.
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