Market Watch: Irrational Markets and Foolish investors

Market Watch

Market Watch

Markets can remain overbought or irrational for much longer than most bears can remain solvent. Sol Palha 

This is a very irrational market. The Fed is supporting it and openly encouraging the corporate world to commit fraud by borrowing large sums of money (on the cheap). These funds are then used to buy back shares to manipulate EPS. It, however, also can push stock prices higher.  Many experts state that this market can’t trade higher much longer, but they have been saying that for over two years and counting. Take a look at the chart below, and while we do not wish this outcome for the Dow, it cannot be ruled out.

 

The weekly chart of the stock NVDA

Look at how long it has traded in the extremely overbought ranges and the stock has continued to soar higher and higher. If one applied traditional Technical analysis to this stock, one would have been inclined to short this stock long ago and would have wound up broke in the process.  We are not stating that the Dow will follow this path, but there is nothing to stop it from taking a similar path. Remember the main force behind this market is “hot money”.  NVDA has traded in the overbought ranges on the slow-moving charts since Dec of 2013.

Market Watch Conclusion

Until the supply of easy money is cut off the markets will trend higher for corporations will continue to borrow money and use this money to buy back shares.  Share buybacks artificially boost EPS and corporate officers are able to walk away with huge bonuses for doing next to nothing. Rates would have to approach the 4% mark before the supply of hot money starts to ease off. Until this occurs every strong pullback should be viewed through a bullish lens.

Tactical Investor  Market Watch Aug 2019 Update

This bull market is unlike any other; before 2009, one could have relied on extensive technical studies to more or less call the top of a market give or take a few months; after 2009, the game plan changed and 99% of these traders/experts failed to factor this into the equation. Technical analysis as a standalone tool would not work as well as did before 2009 and in many cases would lead to a faulty conclusion. Long story short, there are still too many people pessimistic (experts, your average Joes and everything in between) and until they start to embrace this market, most pullbacks ranging from mild to wild will falsely be mistaken for the big one. Market Update Feb 28, 2019

In terms of the stock market

Until the Fed changes its mind, all sharp corrections have to be viewed as buying opportunities, and backbreaking corrections have to be placed in the category of “once in a lifetime events”, provided of course the trend is positive. That is what we are here for; to inform you if the trend is positive (Up) or negative (down).

The world is going to witness a Fed that has decided to make a cocktail of Coke, Heroin, Crack and Meth and take it all in one shot. Imagine what a junkie on this combination of potent drugs is capable of doing, and you will have an idea of where the Fed is heading in the years to come.  Market Update Feb 28, 2019: Forever QE & Stock Market Bull 2019

Now the markets are pulling back and we are getting triggered into some of these plays. Don’t let market volatility change the angle of your perception. The masses complain about better prices when their wish comes true, they panic and flee to the hills and that is what they call investing. They are either oscillating between misery or euphoria and both have a dangerously short lifespan.

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