The market has managed to grind higher and is now only 4 points away from another 52 week high. I've noticed today traders had their guard up. I don't know if it was Prechter’s end of the world call or because of the shortened trading week or what. For instance, I noticed today that the VIX was acting in complacent fashion early on but then it suddenly firmed up and closed flat for the day even though the market was up modestly. This smacks of top picking, which in the case of a strong upward trend, tends to result in an immediate short squeeze.
I also noticed that the rydex jokers have pulled back on their bullishness tonight and are now in neutral territory and there was quite a large mutual fund equity redemption this week! If this sudden pop in fear doesn't unwind quickly we could end up seeing a blow-off move to the upside whereby we just grind higher right through to the end of the year...sentiment be damned! The same thing happened in December 2003. Sentiment indicators were showing extreme bullishness..in fact, it was off the charts and yet the market just kept on chugging higher. We aren't even close to the same level of bullish extremes compared to December 2003 but to be fair, the economy back then was showing clear signs of revival, i.e. job growth, wheras now we are seeing modest improvement in the economy.
Maybe I'm making too much of this and these strange behaviors will be just one-offs. We'll soon find out, however, based on what I saw today, I'm now accepting the notion that we could in fact see a blow-off rally that carries us right through to the end of the year. At the very least, a pop to a new 52 week high before bears finally get some play is now appearing likely...but you know what? I feel like I'm guessing here and second guessing myself.
My head is spinning right now because I had a vision of how I expected the market to play out but now suddenly things are far less clear. It's frustrating when this happens and when it does, I will step away from the market and do nothing until I get my bearings back and that's exactly what I'm going to do. And you know what? I'm becoming more and more disinterested in the day to day ST action anyways. What I am becoming more interested in is identifying the next big thing....the next big winning sector for the coming decade because that's where big money can be made by simply buying and holding early on in the trend. I have a couple of ideas that I'll discuss soon.
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