Imagine how you would feel diving to the depths of the ocean, and just staying there, for weeks at the bottom. No air. That is how you have felt like as a bear after shorting the V bottoms since last year.
For the bulls, its the opposite, an early long can go underwater, but like a beach ball, it wants to go up, and you need a lot of force to keep it down. In the end, the market pops back up, sooner or later, and with vigor. And the underwater long eventually ends up being a profitable trade.
In this market, after you make a bottom, the bulls have little to worry about for at least a month. We are still in that grace period off the bottom, where bulls are reallocating back into stocks, after the shakeout, well after the bears scramble to cover. The bear scramble period ended in the middle of last week. Now we are in the "bull reallocation back into stocks after scary moment" phase.
We made a mini-climactic(the Nasdaq was climactic, lots of pessimism) bottom on April 14, after just a six trading day downtrend from top to bottom. It would make sense to pullback and back and fill, but that's your father's market. Not this one. I have altered my trading approach to fit in with the excess trillions of liquidity and the hedge fund herd mentality. When stocks bounce back from a bottom in this market, it goes on for several weeks. During that period, every minor dip, of 20 points (~1%) is a raging buy. That is why I bought the dip on Friday ahead of the possible Russian invasion of Ukraine over the weekend. If you don't buy when there is added risk premium in the market, then you have to pay up.
Staying long at least into bullish Tuesday, followed Wednesday with FOMC day, which is also bullish!
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2 comments:
Looked strong initially but not so much now. Could this still be part of the previous correction?
It is getting choppier now. The old patterns aren't working as well. Less trend, more chop. It feels like we have a retest of the April lows in the Nasdaq, around 3990, which would equate to about 1840 on the S&P. I will look to add there on longs. To sell back around 1870. Got in early on the long, and underwater, but still looking to play the range here, from about 1840 to 1880.
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