Happy Thanksgiving. The turkeys are running for their lives. Everybody and his bro now proclaims that the bottom is in for stocks and that healthy little pullback sets up the end of year bigtime rally. The sky is blue with rainbows. A unicorn walks by. What a Wonderful World as Satchmo sings. The color of the rainbows.....
Traders are tripping over each other to buy stocks worried that they will miss out on the bigtime end of year rally that they perceive. The rampant complacency and euphoric bullishness is historic, and enduring, so far. Stocks rally this week to the moon pumped by retail stocks, utilities, chips, banks, commodities, it is one big party, and yesterday volatility collapses creating another spurt higher.
The rampant complacency and fearlessness in the stock market has gone nowhere. It remains in place. The little November selloff is small potatoes. You ain't seen nuttin' yet. Everyone must pay for their misplaced optimism and euphoric bullishness and this is the path ahead.
The last three red circles on the right hand side of the charts verify the rampant complacency. No one is buying put protection, instead it is calls all the way. No one needs downside protection because they say the stock market is going up non-stop and the pullback is great because you can buy more stocks cheaper. These folks are going to get bludgeoned by the real pullback that is coming.
Generally for the CPC, you want to go short when the numbers are down at 0.75-ish. The CPC and CPCE remain good tools but like everything else these days, the numbers are dealing with a lot of counterforces and conflicting signals. A good time to go long is to nibble on positions you want to open when the CPC moves above 1.05-1.10. The 1.20 is a solid buy, buy, buy signal. That is when the panic and fear is so rampant that stocks have nowhere to go but back up. Timmy Trader was so panicked during the April selloff, he ran over to the window and jumped out. Coworkers were mortified but then realized the trading floor is on the ground level.
Note that all the bottoms since the big April bottom come with lower CPC numbers below the 1.20. It tells you that the stock market has not seen the panic and fear yet. Keystone loves panic and fear because people run out of the burning building, with their hair on fire, swearing that they never want to own stocks ever again, and he will gladly take those shares off their hands.
But the recent crazy price action is not inspiring to go long. The Keybot the Quant algorithm flipped back to the long side this week as more AI hype, other happy talk, and the Hassett orgy kicked into high gear. Hassett has orange on the tip of his nose. He is not a brown-noser, he is an orange-noser. News hit that Hassett has the inside track for the Federal Reserve chairman job after Powell is finished in May and, since he is King Donnie's lackey, will lower rates (Trump is a real estate guy so he loves debt) so traders immediately hit the buy, buy, buy buttons. The easy money of lower rates will flow into the stock market making the rich, that own the stock market, richer. It is crony capitalism filth on full display daily. There are actually stupid people that think capitalism exists. That's funny.
Do not take a lackadaisical approach to stocks. Consider the big rally this week to be another opportunity to exit the stock market. You will know a tradeable bottom is in and it is worthy to buy stocks on the long side when the CPC tags 1.20. Until then, be super cautious and if you are holding a lot of longs, you are likely going to lose a lot of money. Keybot the Quant turned uber bullish so it will be interesting to see when that joy reverses since the robot only sees 1's and 0's. Sing us a song, Piano Man. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.