Negativity is a bubble

A lot of sideways movement means that there’s no reason to be heavily invested either way at the moment, unless you have specific plays. Gold looks poised to back off a bit, particularly if the dollar should bounce, whereas I think oil has upside at the moment given the extreme negativity in that sector… the speed with which yesterday’s gains were sold, plus interest, is telling.

IMO we’re building a base for a rally - no, it’s not “over”, it hasn’t yet begun… financials are a tell - and who knows what the spark will be. Could be VIX, BDI, USD. Or MACD on the longer index charts, or a post-redemptions new year. All of these are shifting at the moment, and at what point we stop waiting for support and start moving on it is anyone’s guess. The fact that they’re all turning together suggests to me a very powerful move. Nothing more than a bear market rally, but this doesn’t mean it can’t last longer than everyone’s expecting; and everyone seems to be expecting no more than a flash in the pan.

I suspect that a lot of folks are waiting for a decline, either to play the short side, or to go long at a better price point. If we do get some deep red ink, it could turn up very fast. The pain for the shorts gets greater from this point on, because declines will be too short and recoveries too quick for any effective profit-taking. But I don’t think this will deter many of you… negativity is a bubble, and conviction always trumps prudence when speculative forces take hold.

Related Posts:

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• Your question about FAZ is what most traders ask.
• Tomorrow will indeed be very important as to the short-term projection of the US stock market.
• From 2010 till 2014 is the important period for both developed and developing countries.
• Go long the dollar and the yen even though they’re ‘terribly flawed’.

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