Most analysts are still very skeptical of this market rally and this bodes well for us. There is still a net outflow by investors. Everybody is looking for a market top, then a correction, and a crash. That is the unanimous view of most hedge funds, momentum players, chart slaves, and amateurs. They are all on the same path.
Last week on Thursday, all the media and financial gurus where trying to explain why the market soared. They were frustrated because they could not find a single reason for this powerful rally in risk assets. Remember, the news does not determine the direction of the market, but rather the direction of the market determines the news.
The upside breakouts in the market are still not generating excitement but rather confusion. This is confirmed by another week of outflows from equity funds by investors. If most investors are looking for a crash, then the market will continue to achieve multi-year highs. This will wear down all these folks who just follow each other like cattle. Once the herd decides to jump on the bandwagon of risk, then it will get interesting.
The highly recommended and very popular dividend-paying and so called recession-proof stocks are headed into a long-term bear market. It started in August as everybody piled up into them. The risk assets have a lot more potential for price increases than high-dividend stocks. The next move for US treasuries (TLT) will be very swift as they go down to meet their 200-day moving average.
Don’t be fearful until all your friends become excited and eager to buy risk again. We at ETF Trade Advisor will be ready to strike when it counts most.