Markets raced higher on Friday as short term cycles did form that “higher low” pattern we expected. We are likely to see markets run up to form the next top and one that could equal or even surpass the high of July 20.
We clearly have a short term bull trend going on and pullbacks normally make markets stall with a sideways move, or drop indices to their 5 day moving averages. Last week buyers were encouraged with the support of short term trends. The recent bold move isn’t the same old “rally for two days and then crash the next day” like we were seeing earlier in the year.
We reckon that this rally will keep going and it isn’t necessarily an institutional rally. This brings up an important point about all the bad news you were hearing a month ago of no interest rate increase. The biggest concern presently is China’s stock market woes. Equity investors are concerned about the second, third and fourth largest economies in the world slowing down. A month ago that negative news may have kept you on the sidelines that are the rationale you used to determine when to be in or out of the markets. But where’s all that bad news now that markets are rallying? Nothing has changed; it just doesn’t seem to matter and it never does.
Our goal is to stay in the trends long term or short term, and ride if for all its worth, recognizing that eventually it matures. Make sure that your stop prices are all updated, when they finally get triggered, like recently in our Long Term Index Trader for short positions, then sit in cash and wait for the next entry.