The market is always wrong, both on the upside and the downside. Once you commit to this reality, trading becomes a lot easier. Then it becomes a matter of breaking down the processes by which the market signals it's about to become wrong in the other direction.
Anyone who's strategy did not give them a buy signal early this week needs to revisit that strategy. The best measure of how robust a strategy is is whether or not it forces you into the market before big moves. That's it, really. If you can do that, that's game-set-match for you as a trader. I trade hourly swings and I got 6 different long signals this week alone, including a signal Friday morning at 1319, and pulled a bunch of points out of the ES over the course of the week (of course, in a market moving this steadily anyone going in and out, like I am, will not keep pace with the market itself, but I personally have not found a way to differentiate, in advance, a market that will reward "buy and hold" more than it will reward my hourly swing strategy and I don't even bother to try at this point). Each and every one of those signals could have turned into a whipsaw, but I know from historical precedent that a whipsaw is actually the lower probability outcome, so I hold my nose and buy. If you just act like "scared money" and think "the market is too high to buy now", you will not only lose the opportunity to participate in the rally, but you will, in all likelihood, be that guy who goes short too soon, thus getting the double whammy. That continues until either the pain becomes too great and you learn how to trade or you quit trading.
True enough and there's definitely a mix of actual "smarts" and just being smart in knowing the right people and how to spin a good story to people lower on the market food chain going on. As with most things in life, grading is on a curve. So, maybe not "smart money" but "big money" is the appropriate term b/c they certainly are big.
The bulls expecting a SPY much higher than 137 (which is only ~ 2% from current price of ~ 134) in next few weeks might get rear-ended if it reverses, and get deceived if it moves horizontally. Should that be the case, if they have not put some cream to soften the blow, they would get creamed (and rear-ended).
Your question is a really good one! It is actually a normal move (less frequent maybe, but normal)--- what a man sees depends on where he sits, so to see everything a man may need to sit everywhere. N'est-ce pas?
But if it's monstrous, the decline was even more monstrous. S&P fell from 1370 to 1250 in less than two months, and 1345 to 1250 in a couple of weeks. A rally back from 1250 to 1340 is merely a mirror imagine of the decline that happened in the first place. It is only 'monstrous' if you measure from the very low to the very high, and ignore the prior price action. But that is entirely arbitrary. Why not measure from the 2011 highs to the present price? Then we get a mild decline of 30 ES points. You need to stop focusing so much on prices over the last 1-2 weeks, and consider more the last 1-2 months, or even longer. You need to think more about why prices declined 120 S&P points in a few weeks, and what the logical response is if the main reason for that decline suddenly evaporates.
Why would the market fall because of an event that was already full anticipated well in advance? Normally, the occurrence of a fully anticipated event causes no reaction at all, because it is already discounted by the market. In fact, sometimes you get an inverse reaction. Markets moved based more on unexpected and unanticipated events, not ones that are already understood and priced in by almost all participants.
Just when the market timers predict Armmeggedon buyers come out in force. IMO, they bought it up in order to make room for Friday's grand toilet flush. I mean, it is interesting to see that despite the 'doom and gloom' the cheap dollar and a search for yield definitely keeps a bid out there - especially at the longer term support levels.
the move was definitely excessive if one was Short at the bottom and decided to sit it out. on the other hand, if one was Long early into the move then the move is clearly not excessive. i hope this makes sense. -- Prof. Shortie Out
Well, your comment is actually quite revealing in the sense that every market participant has a different timeframe perspective. A 'sell-off' to a scalper using a tic chart is quite a different thing in the eyes of an institutional investor. Quite.