It seems that a lot of the talk by market pundits right now is all about a bear market brewing. Here is their chatter – it’s coming, no, it’s already here, oh no, oh no, the market is rocketing up. Wow!
Last Friday was a great example of how news creates price spikes in the markets which usually quickly reverses up or down. A major short squeeze happened and a lot of day traders got caught off guard. Employment numbers came in low at 142k versus the 200K new jobs that were expected. Immediately after the news markets sold off hard at the open but, then recovered throughout the rest of the session, finishing up strong 1.4% up on the day. I spoke with some day traders and they said they got slaughtered. When trend cycles are not in full agreement with each other we get these kinds of reversals. Cyclically, we have been expecting markets to have some recovery strength near term. Anemic market action is a reflection of cyclical interference that is always created to some degree when we have some cycles moving in opposite direction.
As we’ve been discussing for a couple months the nature of this year’s market continues to be momentum/short term swings trades and very little trend trading. That won’t change until we finally get a cluster of trends/cycles of long and medium terms are all finally bottoming together. A final annual low could require a deeper re-test of market lows, as we had in 2011. It can also mean markets just have to burn off some more time and allow the choppy cyclical interference to work it out. During the fall of 2011 it was the last time we were hearing the entire pundits in the media pounding in our head that the bear is here. As you are well aware of our trading style by now we do not care about the news but rather our systems and what the market gives us. We really try to block out the noise in our trading decisions.
Yes, fear continues to erode confidence in world economies, and political news remains divisive, but let’s faces it, that’s been the case since the bull began in 2009. For now, markets remain tentatively bearish. Let’s not forget the age of this bull. We may or may not be heading into prolonged bear market. The jury is still out on this.