Saturday, May 14th, 2016

Relentless bullish action to the upside


Relentless market action to the upside continues. There is no rest, respite or stop. The whole market has gone into what Greenspan would call it ” Irrational exuberance” and this time some more. Everyday the bullish action continues. Financial liquidity pumped by the Feds has unhinged any inhibitions and the market does not cares if gets overbought or stretched from moving averages by 50- 60 points. Good news is good and bad news are even better and there is a such free for all come and get it attitude.

Just a few years ago in 2008 the same people were thinking the world would end. There was depression and sorrow all around and during cold winter months there were red candles each day and they were running the stocks into ground. Perhaps the perception and psychology has flipped 180 degrees and now those days look so far behind. Amazing how trader mentality works and how perceptions give us the reality. You can read all about them here on this site under archives.

Investors are pushing the cart through the stratosphere at this point. This exuberance is sweet on the upside- but really tearful on the downside. NDX and to some degree SPX are both almost parabolic. These parabolic moves occur and when they subside they can correct 62.6% on the Fibonacci retracements or more. All the indexes are overbought and extremely stretched from moving averages which are trying to catch up but they can’t.

Taking long positions and chasing stocks or indexes is at this juncture -should be carefully planned. You need to prepare for the downside, and if you don’t sooner or later it will happen. Nothing can sustain this kind of hyper moves.

GOOG has now climbed over to 900 and making even higher highs. The stock is now forming an upper level canopy which if broken can result a sheer drop. It may not happen but the set up is risky for longs. AAPL on the other hand has managed to get above its 50 day in decent rally today. This stock has lot to prove to investors.

If you are not in the markets don’t get blinded by these moves, think and conserve. You will not miss much if there is a pullback at some point.

 

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