Steep vertical assents are almost always corrected with an equal decent. Scroll thru some charts you will see what I mean. Up until the last 8 months the indexes had been stair stepping higher in an orderly fashion, just recently have they gone vertical, at some point it will correct.
The steep rises were in stocks, and 90% did correct most likely due to profit taking. The indexes may be different. I went back as far as 1980 and the longest number of up weeks was 9, nine up weeks in a row, today we are at 5 up weeks. In the latter half weeks 7,8,9, the weekly point gains were less and less. Who knows maybe we break new records and go up for 3 months straight, seems thats how you lure in the suckers and leave the greedy late comers holding the bag.
The markets are going up more steeply recently to compensate for the feb 27th selloff The trend that began last August is resuming
The rally from July 06 to Feb 07 was steep but had retracements and gained 1400 points in 7 months. The latest rally 1000 points in 23 trading days. In this type of environment you have two choices, hold your nose and buy and run the risk of waking up one morning and see 1/2 of you profits gone. Are sit on the sidelines and wait for some sort of correction. This late in the cycle is seems very risky, next year at his time, we will be in full bore presidential election mode. Maybe this is the Republican strategy, " look at the stock market American voters" VOTE REPUBLICAN
Why would you lose half your profits in one morning? Even after Feb 27th I was still ahead. This is why I am against holding highly leveraged positions. It makes you too jittery and more prone to sell on the smallest corrections. If you trade 3-1 leverage a 1% selloff becomes 3% so it would be very easy to lose half your gains.
The thing is there's never a way to put a value on the market. If you assume market efficiency, then IMO you're in trouble. You need to play the market as it is and ignore the psychology behind the numbers. The market demand/selling will push prices. Prices can rarely be used determine strength or weakness (if you plan on being a consistant trader). That's another reason why edges are so difficult to play. You can pinpoint the edge, but most of the time when the market reaches that point it's already pre-determined that marker as useless. Just think about that for a second. Time and price goes into charting. Too many people overlook the time aspect. What's a token high now is not always going to be a resistance for traders in the future as supply and demand could evolve.
Highly leveraged positions are ok but 8/10 traders dont know how to manage those positions. Executions are more prone to failure. I firmly feel that In order to trade a highly leveraged position consitantly, you MUST develop and use a systematic approach in a way in which percentages will be your gauge and not "feel". Using market edges will not effectively accomplish this. There are exceptions to this as usual.