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Most trading bromides are useless and annoying (the all-time champ: “Trade the chart in front of you”) but one I think is actually worth remembering is “Trees do not grow to the sky.” That is a reference to stocks going up, but there should be some converse for stocks going down, like “Roots do not go to the Earth’s molten core.” Nah, that’s not quite it.
Anyway, this has been a fun week, no doubt about that for one moment:
I stumbled upon a particular item I wanted to share, because I think it speaks to a phenomenon going on right now in this Stonks Only Go Up Version 2 we live in. It began with this post from five months ago, in which this person declared he was putting the entirety of his $150,000 account into Carvana (CVNA) calls. At the time, it seemed insane, because CVNA was a company that seem destined for nothing but bankruptcy.
Well, I am trying to look at the indices as unbiasedly as possible, simply looking at technicals and things don’t look good for bears. I’m sure this comes with a “well duh” response, but it doesn’t hurt to look at the charts and say the obvious out loud.
But I am more concerned now as I am trying to add a behavioral profile to the market while watching the action lately and we are in the midst of climbing this wall of worry which (when in the thick of it) seems to have no end. So how do we plan for possible turns? I certainly can’t profit by holding shorts throughout this rally (from an index perspective). At best, this is a stock picker’s market to find decent shorts to ride down while riding the broad indices up. But here is what concerns me the most:
(more…)Let’s start off with a quote from the boys down in Gainesville:
Our experience with second-wave retracements is that you have to be patient to let the market trace out all of its subwaves. It’s a challenge emotionally, particularly in a bear market, because the goal of a second wave is to recreate the bullish spirits of the prior peak. By its end, investors are convinced the bull market is either back or intact. It’s the paradox of market behavior.
I’m not much of an Elliott Wave guy, but I do think they work rather impressively in bear markets. If the agonizing climb from October 13 until early July 2023 was indeed “Wave 2”, it would actually make a lot of sense. Off the top of my head, what I’m witnessing is:
(more…)
