The major averages hit new highs and traders instantly separate themselves into two camps. Those that have pounded the table to get out of stocks and those that have gritted their teeth and rode this rally higher. I find myself straddling the fence and I’ll explain why later.
To survive in this game you need a good set of blinders. There has been constant noise flooding the airwaves about Italy, budget cuts, China’s housing market, and whether Kate Middleton is having a baby girl or a dragon. The market doesn’t seem to care and why should it?
It’s greed that’s broken through the levels that many were expecting to bat down price. It’s greed that has lead to profit. While the entertaining axiom of ‘hogs get slaughtered’ has it’s moments of truth, the equity pigs have been rolling in their slop and loving it while taking transports, the Dow, and the S&P to new highs.
I’ve blogged numerous posts this year that have looked at roadblocks equity bulls have faced. We’ve seen divergences in momentum and risky assets – the market has just plowed right through. We’ve seen levels of resistance that equity bulls have karate chopped to pieces. Fibonacci is probably rolling in his grave at the sight of disrespect given to his precious retracement ratios. I’ve mentioned all of these in the last two months but have made the point that we must watch price action for confirmation.
This whole time I’ve been conflicted. While the yellow flags have been practically falling from the sky they have not mattered a single lick….yet. An oversold market that diverges matters. It’s the timing of when it matters that is critical. We must see price confirm what the indicators, and intermarket happenings are showing us….and not a moment sooner. This means you likely won’t catch the top tick, although it doesn’t mean someone on Twitter won’t bust that they did when hindsight becomes 20/20.
Farmer Market will eventually take away the slop and the equity hogs will be slaughtered. That’s how this game works. While it’s okay to continue to oink, keep an eye out for the farmer – he will come and it will likely happen when you least expect it.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.
