Bullishness abounds! Last week the S&P 500, DOW and NASDAQ all closed at record highs. Today I heard this is risk on and a call for the market to move up an additional ten to fifteen percent. All indications out there regarding earnings, covid fears, etc…, are pointing to higher returns. Spoiler alert! This is the exactly what happens before a fall. I am going to say it again, I am not calling a top. I am just calling out a pattern that happens when a top is forming.
There are very good reasons why the market should go higher but it is those things that come unexpected that tend to humble us as traders. Don’t be the guy that buys at the top. Be patient. There will be better opportunities to get in. In fact, this week I am going to be selling some of my stock positions that have done very well. AAPL, FB, MSFT. I am not liquidating but trimming those positions.
August through October are not great months for the equity markets. What could be unexpected is the Feds bond buying. If there is a hint that the Fed will even just slow down the bond buying, the market WILL go down. A five to ten percent correction is very normal but if you are incorrectly positioned, it can be very painful. Just be ready.
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