I know most on here would say just to trade what you see and not what you think, but I constantly see the market starting to go down and then its pushed right back up. I'd love to do more swing trading, but I'm also wondering when the rug will be pulled out and we have a massive freefall. This all seems really effing crazy how much its manipulated. I'm still on the sidelines in amazement Argh, maybe I should just shutup and trade with all this free Fed money being dumped into the system
You are trading with a clear bias. Why is it puzzling that the market is going up? The recession ended, we have had 18 months of positive GDP growth, employment is now heading back up, corporate profits have been repeatedly beating expectations, and price/earnings ratios on many blue chip stocks are either cheap or moderately valued (e.g. 12-15 times earnings, with earnings growing at a nice clip). Name me one bull market after a major bear/crash that only lasted 18 months? Normal bull market cycles are 3-5 years. The Fed has just announced a policy of debasing the dollar, which is also bullish for somewhat inflation-hedged assets like stocks. What is so irrational about the market at 1215, given those fundamentals? It is still off 23% from 3 years ago, and down over 20% from its level 10 whole years ago. I see nothing in your post that makes a robust case that prices are clearly overvalued. Why do you think there has to be noticeable pullbacks to give you an easy chance to get long? Don't you know that bull markets often grind higher without giving easy pullback entry points? Have you heard the term "a bull market climbs a wall of worry"?
ZeroHedge.com said it best in their econ data preview this morning: "For those who still care about the economy, now that it has no bearing at all on the market, which is merely Bernanke's plaything...."
Zerohedge are just economically illiterate permabears who are frustrated that their $10k E-trade account blew up by being short all the way from the 2009 lows with no stop. They have been consistently bearish with no flexibility or risk control, all the way up. A bull market could last 10 years, go up 300%, and smack them in the face with a wet kipper and they still wouldn't recognise it.
Regarding "why is the "market" going up like this?", refer to the following post in my journal: http://www.elitetrader.com/vb/showthread.php?s=&postid=3002702#post3002702
Just put out market buy orders as limit buy orders will never get hit no pullbacks in this market. No matter what price you get filled at doesnt matter its just a matter of time before you're in the money. EASYYYYYYYYYYYYYYYY...
So wrong it's hard to know where to start or stop, but just a few things: 1) GDP has a large "government" component. When they borrow/steal money they don't have for stimulus, GDP magically goes up. 2) Official unemployment rate holding steady at 9.6%. If that weren't bad enough, the calculation used in the early 80s would have us around 20%. Moreover, the "good" NFP report is very misleading. To wit, labor force participation has now dropped to the lowest rate it has been since 1984. And people not in the labor force are at their highest levels ever. 3) Corporate profits have been based on cost-cutting, productivity and most likely, some funky accounting. None of this does anything for hiring or long-term sustainability. 4) While we're talking all-time highs, the number of people on foodstamps has hit a new record as well. Yipee! Go QE, zero interest rates and juiced stock market! I'm sure the food stampers are 200% long with their leveraged ETFs right now. But I guess it's better to take in all the econ data at face value and feel better about ourselves. Who really needs to peel back the layers and actually analyze it?
What if: 1. The Econ data keeps improving 2. The fed cools on the full QE II? 3. Signs show up for impending rate increase? What will happen to gold and some other speculative commodities? What will happen to the bond market? Where will the money go to? Just saying...
Correct. Its a matter of how many points you want to make. YOu can go long RIGHT NOW and you WILL make money on the position, but there's a chance you might have some drawdown. Or you can wait for a 5 point pullback, which you probably wont get, but if you do and you get hit long you are guaranteed to make alot more points! love it!!