When the trading gets less emotional, I view sentiment as being less helpful. And in general, trading is less emotional in a bull market than in a bear market. I think we are in a bull market. Some many disagree with me, and say we're just having a monster bear market rally. But the lack of volatility and steady uptrend are bull market signs.In a bull market, sentiment indicators lose some of their effectiveness. Fear is a stronger emotion than greed. And when markets are less emotional, the sentiment indicators should naturally be less effective. I will bet that buying weakness during bearish sentiment environments is much more profitable than selling strength during bullish sentiment environments. Bottoms tend to be sharp and fleeting, tops tend to be round and lasting.
Right now, shorting the market because sentiment is too bullish is not that high a percentage play. It is still better than 50-50, but not much better. The reason is because tops are processes and last quite a while. Thus, timing a top based on sentiment indicators is more difficult than timing a bottom on sentiment indicators.
Timing becomes harder in a bull market. My strategy is based on pinpoint timing. I am a manic trader. Not an investor. I need to time markets correctly or I don't make money. That is why I hate bull markets. Not just because I'm naturally bearish.
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2 comments:
Excellent way of putting things and recognizing what kind of a trader you are...learning a lot from you...Thanks
Are you planning to go short overnight(and take the hard trade) and still thinking a down open tho futures have recovered quite a bit....
I am shorting in the overnight market. My reason is tactical. I think the odds of a big gap up are very low. Therefore, with the market being up 4 points from Friday's close, there is little upside and much more downside.
There is also resistance around 1136 on ES. I am just playing the odds.
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