No logic in the elated bullish sentiment

3-5-13 Dow.jpg

Dow Index Futures

I am always reticent when doing analysis on a market at an all time high or all time low when constructing a trade. See above history in the making as the Dow is at all time highs as futures inch towards their 2007 highs. In the last 11 weeks after challenging the 100 day MA in mid-November futures have appreciated 14%. This would be banner performance for an entire year forget in 1 quarter.
Off the 2009 lows stocks have advanced 119%. In the last 15 weeks there have only been 2 negative weeks. In my 12 years career I cannot remember such a one sided trade. This is a crowded trade and if we dig deeper I just do not see the logic in the elated bullish sentiment. I have been wrong for several weeks and by positioning clients in a small bearish trade it has been a losing proposition. If not speculating at a minimum I would say investors with sizeable holdings should lighten up or institute some kind of hedge.
A number of people do not adhere to technical analysis but looking at the chart above I think there is compelling evidence to see the Fibonacci levels come in at key support and resistance levels in this chart. I do not know the catalyst but I do expect to see prices roll over in the coming days/weeks and at a minimum make there way to the 38.2% Fibonacci level. This would represent a near 3000 point correction in the Dow and likely a 300 point plus decline in the S&P…trade accordingly.
To discuss in more detail this chart or any other you can reach me at: mbradbard@rcmam.com or 954-929-9997
Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.

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