Bull Market Example: This Market Is A Perfect Example
The volatility indicator (image on the right) experienced another 400 point drop, and hopefully, this trend continues as the reading are still well above the overbought range, which starts at 4500. Another 600-900 point should lead to a noticeable drop in market volatility, and it could lead to less extreme weather patterns.
The anxiety gauge is still locked in the same position, but sentiment readings continue to defy logic. Bullish sentiment refuses to trade past its historical average, and this week readings are quite interesting.
Bullish and Neutral readings both came in at 36 this week, and that is very telling as it indicates that the masses are still a long way from embracing this bull market. We hypothesise that when the bears are asleep, and the bulls are barely awake (as is the case presently), the market will tend to drift towards the direction of least resistance and the path of least resistance is up. Market Update July 24, 2019
These readings were tabulated before yesterday’s pullback (July 31st), so a few more days of selling, could propel bearish readings. It is incredibly surprising that at this very late stage of the game, to see such a small number of individuals in the bullish camp. Once again, we have to reiterate no matter how strongly you might feel that this market should crash and burn, don’t act on those sentiments. No market in history has ever crashed until the masses have embraced it, and we don’t think this Bull market is not going to change that equation. Until the masses embrace this bull, the odds of a crash are very low.
How To Play the Current Bull Market
If the market pulls back, it’s a bonus, and this is why we also adopt the stance that when the trend is up; the stronger the deviation, the better the opportunity. Strong pullbacks should be viewed as early Christmas bonuses as the trend is firmly up. Sharp pullbacks can be used to open or add to one’s current positions. Market Update July 24, 2019
The best time to buy is when the trend is up, and one feels uncertainty creeping in and vice versa. When one is sure that everything is fine and the markets are destined to trend higher, then it is more likely that the opposite will come to pass.
The Dow has now dipped below 27K (on a monthly basis), and in doing so there is a good chance that one of the two outcomes we favour may come to pass:
- The Dow drops hard and fast to the 25,500 to 26,000 ranges, the crowd stampedes and in the process, the masses create a lovely long term opportunity for Tactical Investors
- The market pullback a bit and then trends sideways and in doing so pushes our indicators into the oversold ranges.
The trend is your friend anything that falls outside or in between that is your enemy. Never fight the trend for the outcome is always the same; the outcome in case you have not figured it out yet is that you will end up on the losing end. We continue to monitor the weekly charts closely as a bullish MACD crossover could lead to an explosive upward move. However, if the crossover fails to complete the markets will finally let out a nice dose of steam.
We see no reason to worry; investors should continue with their daily lives and focus on the things that make you smile or leave you in a peaceful state. Remember, today’s news is nothing but weaponised propaganda.
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