You would think that such a simple strategy, buying a pullback in the SPX, could not possibly have such a high risk/reward and an amazing win rate. The market has done it again. Another V bottom, frustrating bears looking for a more substantial pullback, and too much too fast fund managers who can't fathom buying up here, after such a strong rally and already up 450 points, which is12% on the year with more than 7 months remaining.
The bubble keeps getting bigger. And it is a resilient bubble. Very calm uptrend, the dips are brief and not even that scary, if you look at the daily chart. Of course, if you are a minute to minute daytrader trading with $500 margins on ES, the volatility will blow you up easily. But for a position trader with proper risk sizing, the volatility is rather tame, especially relative to a VIX that has been trading between 20 to 30 for most of the year.
I saw a chart on Twitter yesterday showing the current inflows into equity funds. The pace would put it at the most since 2000. And although earlier this year, a lot of that demand was met with new supply, recently, there haven't been so many IPOs/SPACs, and stock buyback announcements are already back towards the previous huge amounts. So supply/demand from money flows have been providing upward pressure for the stock indices.
Bitcoin has bounced back strongly again off the dip towards the $30K level, and risk appetite comes back quickly in this environment. Investors will occasionally get scared, but they don't stay scared for long. Thus the V bottom patterns.
My forecast for more choppiness, and another move towards 4060 this week has been completely wrong. I have no edge here, with the SPX back above 4200. Too early to short, and too late to buy.
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