Don’t be stubborn
The markets seldom move exactly as one expects them to move. A few weeks ago, when the S&P 500 was trading at 2800, I was wondering if the move higher had exhausted itself (see Shakeout before higher?). It seems I was a bit too early, the S&P rallied a bit further, to 2860 on Thursday. This was just a day before we saw a nasty reversal with the close at the above mentioned level 2800.
At first Thursday’s price action looked constructive to me. There were quite a few breakouts out of solid bases, the market convinced everyone into believing it can continue moving higher for longer with very shallow pullbacks. But then, on Friday, reality struck and we realized the market fooled us. Most of the breakouts failed hard, and as it seems, most likely marking a short term top.
As stated many times before, I believe we are/were most likely in a cyclical correction and not rolling lower into a full blown recession. However, the key is in managing risk, so don’t be stubborn.Read More