Over the past few days the market has been under selling pressure. The S&P 500, which experienced a weak breakout last week, appeared to have experienced a failed breakout this week. This fact, and the fact that no one believes in the tech rally that just won't quit and oil prices reaching near $90/barrel, has caused a bearish din amongst pundits that is nearly ear-shattering.
A few weeks ago we had this same situation and if you recall we used the bearish sentiment as a reason to get aggressively long. Doing so paid off very nicely.
Over the past two days we got short and tightened up stops on long positions because technically it was the right thing to do. Today, however, it is time to react quickly to this fast moving market, which demands agility to survive, and get long again.
Over the past few weeks we have been developing a list of strong performing stocks to watch. Some of those stocks have underperformed and experienced heavy selling pressure. Some though showed their true colors and their true colors are very bullish. Stocks that didn't succumb to selling this week are set up to rally hard.
We suspect that roasted bear is still on the menu. Don't listen to the noise. The charts and the sentiment readings are telling us that the correction is over.
2 comments:
I'll have to agree with Bob Carver this time around. This looks like 2000 all over again. Back then the last mania was biotech and now it's Chinese stocks. It's only a matter of when the market crash heard around the world kicks off.
We are agnostic about how this rally will end. However, and it's a big however, we have a problem with how Carver handles this situation.
Carver has been extremely bearish on the market for several months now. Meanwhile, over the last few months we have been making a huge amount of money trading the long side. Carver's subscribers have missed out on some of the best gains this market has offered in at least a year.
When the market does ultimately correct it's not going to just gap down one day from its peak. Market crashes, including the 1987 crash, occur after the market has already corrected significantly. The 1987 crash could also be refered to as the 1987 capitulation. It turned out to be one of the best buying opportunities in 100 years.
The bottom line, if you spend too much time thinking about macro issues here you are going to miss out on the micro reason why it pays to get long; and it has paid to get long this market.
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