Commentary: The past several weeks have proven to be very difficult for traders who believe that the markets are headed for a pullback. It seems like any signs of weakness have been quickly overcome by the bulls. In general, markets continue to chug along as they race to new highs. While it is prudent to preach caution when the markets are in such a strong uptrend, the simple fact is that there is no evidence yet of a market top. It is wise for traders to respect this strength and simply recognize that the environment is overbought. In his famous quote, John Keynes stated that “the markets can remain irrational longer than you can stay solvent.” Whether you believe this rally makes sense or not, the bottom line is that the markets' upward march continues.
Bottom Line
Last week, we reminded traders of the importance of remaining open-minded and flexible. This is obviously still the case and every dip this week was quickly bought. At some point, this behavior will be punished as the market never offers up an easy trade for too long. This is what makes trading so hard, especially for beginners. On the one hand, the market continues to rise every day, on the other, the environment also becomes more dangerous as the days progress. This is why we constantly preach for traders to stick to the best setups with the tightest measure of risk possible. Traders should pay close attention to the patterns that have developed the past few weeks, especially in QQQQ and IWM. A market reversal will likely begin with a breakdown under these patterns in these names. Until then, the rally must be presumed alive and well.
Nessun commento:
Posta un commento