Optimism Phase with flashes of Euphoria via weed and blockchain stocks

The market has gotten off to a rip roaring start up about 4%. It's been a breathtaking move these past 5 months. I've read somewhere that the Dow Jones is the most overbought in its history which spans over 100 years! I remember back in the depths of the 2008 meltdown how insanely oversold the market got in November of that year. Overbought markets are not necessarily a sign of a top, it can often signal a long term breakout but even in such cases, a resting phase tends to follow where the market consolidates. That has to happen at some point. Many have been calling for a 10% correction since at least September and have been made to look the fool. That's the thing about trying to play a correction in a bull market. It's very, very difficult to time and even if you get the timing right, the correction often doesn't go as deep as you were expecting.  Now, having said all this, if was was ever a time to be on the lookout for at least a consolidation it would have to be about now given the sentiment surveys and signs of excess with the weed and blockchain sectors. We are clearly in the optimism phase of the bull market with flashes of euphoria.

People are blindly piling into these 2 hot sectors despite the likelihood that most of these companies will never be profitable. I've been around long enough to know that investing on hype in the long term is a guaranteed loser however in the short to medium term if you are a nimble trader you could do well. At this point however, if you get in  you'd be arriving late to the party. I overheard an adviser at a conference the other day talking to his client about ways to play the weed sector. The average retail investor is very keen on this sector and bitcoin/blockchain too and that to me says stay away. Sure, they can go higher but I'm always looking to be one of the first people at a party, not the last. You jump in now, you need to be a trader, not an investor and have one foot out the door. That's not my style. That's essentially gambling.

The interesting thing about the bitcoin mania is that there is also no shortage of warnings about it being a bubble with a crash being immanent. Warren Buffet recently chiming in that he's certain crypto will end badly one day. If we go by the motto of this blog it would suggest that if a crash were to happen, it won't be just yet. It suggests that the market will first frustrate and shake out a lot of the skeptics just like it did in 1999 with the tech bubble and 2006 with the subprime bubble and then the rug will be pulled out from underneath everyone. So, we could very well see a lot of chopping and flopping with the price of bitcoin  before it rolls over perhaps later in the year.  As such, I'm staying away from this sector but I do want to bet against it one day as I agree with Buffet and don't ever try to write this guy off as being old and irrelevant. Nobody is infallible but this guy has been right far more times than wrong and you don't get labeled as one of the greatest investors of all time for nothing.

I remember when Buffet came out with his bullish "buy America" call on October 18, 2008 when the S&P was about 945, obviously a great call in the long run but in the 5 months that followed the S&P went down another 30% and I bet a lot of people thought he was a fool and lost his mojo.  The skeptics of crypto may have to go though a similar baptism of fire with many of them capitulating or least becoming silent. We'll see how this plays out...