We have said this 100’s of times in the past and will probably have to state it 100’s of times more over the years. The mass mindset is wired to lose; they buy when it’s either time to be cautious or when it’s time to sell. Once again, ask yourself this simple question; why do you feel the urge to jump in when everything looks rosy and the urge to flee when everything appears sour. You will never advance and become a successful trader if you can’t answer that question honestly. Sounds harsh. Well, the market is not a place for traders who are unwilling to adapt to changing conditions. It takes no prisoners; the only adage that applies to the markets is “adapt or die”. This brings us to an important topic. When trying to determine current stock market trends, the focus should be on sentiment.
Bullish sentiment climbed a bit this week, but it’s trading well of its highs. We don’t expect the markets to let out a hefty dose of steam unless the technical indicators are trading in the insanely overbought ranges. Secondly, bullish sentiment should be trading in the 55 to 57 ranges for several weeks on end. Market Update March 21, 2021
Hence current stock market trends indicate that the major indices are likely to trend higher over the next few months.
Current stock market trends outlook based on Sentiment readings
Bullish sentiment is trading higher, but it’s still well below 55, and the needle on the anxiety gauge has moved deeper into the severe range. This is somewhat surprising as the markets are putting new highs almost every week. The Nasdaq’s odds of hitting the 14500 to 15000 ranges rise with each week’s passage; the longer bullish sentiment remains below 55, the better the odds are of the Nasdaq trading above 14,500.
An enormous amount of money is still sitting in money market accounts and cash that an entire market segment could get wiped out. It would not impact the overall trend. For example, the whole Reddit crowd could be eliminated. It would have virtually no impact on the long-term structure of the market, for there is a ton of money out there that can easily replace these investors. On the same token, a plethora of significant hedge funds could get wiped out. It would also have no long-term impact on the markets other than providing Tactical investors with another mouth-watering opportunity. There is also so much hot money that corporations can create by issuing debt via bonds, etc., to drive this market even higher. One of the ways they can do this is by funding massive share buyback programs.
Only the patient investor makes money. The impatient investor or the one that overtrades would be better served if they put their money in an index fund and allocated their free time to drinking beer or mowing the lawn. Riches don’t come to fools, so while we have received many emails asking us to take on a more aggressive stance, our response is no way, Jose. We don’t follow the playbook of the masses, and if we did that, we would not be here 18 plus years later. Having said we will continue to issue entry points on stocks that we deem will make for good long-term plays. These individuals asking us to take a more aggressive stance now were the same ones that panicked when we said it was time to buy during the COVID crash. Once again, ask yourself why you want to buy when it’s time to be more cautious and when it’s time to buy you panic. The truth will set you free, but before it does, it will hurt like hell. And remember, if you add an O to Hell, you get Hello.
Current stock market trends: Expect a correction instead of a crash
V readings are now at 9100, a new all-time high and therefore traders should be ready for sudden extreme action. What does this mean? The Dow could shed 2500 points in a heartbeat and then recoup those losses just as fast. Or sector that looks robust could suddenly implode while the rest of the market continues to trend higher. Sectors that could implode are Cryptocurrency (especially when the Dollar puts in a long-term bottom), precious metals, specific segments of the Hi-tech sector that experienced unreal moves. Please focus on the word could and not will. Secondly, we do not short the market when the overall trend is positive. If you feel like doing that, make sure you are willing to do some legwork and are fully aware of your risks. Market Update February 14, 2021
It is relatively easy to make money in the markets once you have mastered the art of patience and discipline. Failure to master these two skills will virtually guarantee a negative outcome. The reason most investors lose money is that they have no plan. When things look good, they jump in and vice versa. Now ask them what makes an investment look sound, and they will reward you with the proverbial idiotic answer “because the experts” said so. The simple, time-tested methodology that has never failed over the generations is that one should never buy when the masses are euphoric and vice versa.
Our indicators still have room to run, and as bullish sentiment has pulled back strongly, the odds of the Nasdaq trading as high as 14500 have just risen. If bullish sentiment continues to oscillate between the 37 to 48 ranges for an extended period, one could argue that the Nasdaq could trade to 15K before pulling back. Market Update February 14, 2020
This appears to have come to pass. So, what’s next for the Nasdaq? Potentially it could trade to the 15,500 to 15,800 ranges, but then a sharp probably short correction is expected. However, the intensity of the correction is likely to catch almost all the players with their pants down.
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