Drink No Wine, Trade No Top?
I noted some weeks ago that the market was destined for more strength. However, I have been somewhat quiet of late due to some HATE mail. (H)ow (A)re (T)he (E)quities GOING UP? No one wanted this move! No one liked me being tactically bullish. I actually had to hide. Well, I was just “in the rough” as usual. But, the Behavior of Breakouts argued and still argues for more time. Sure, you can “save a bunch of money on your car insurance” but you can also save a bunch of money by not “Trading a Top before it's Time.” Again, as I said this is an ending move and thus, stocks are in an Adoration/Mania phase. Markets often make their biggest and most unbelievable moves at the beginning and end of a trend. My firm's experience suggests that: “Sentiment is often generic rather than specific unless there is an acute emotum
tell or a cohesion
of other cognitive metrics.” The most important tell would be a reversal rather than just high sentiment. Our daily sentiment is 96% bullish today! But we recorded a 99% bullish last week! It’s not the sentiment; it’s the cognitive changes
you to try to trade the top. Maybe It Ain’t That Hard After All?
I look below at the SloganSearch for HARD LANDING
. This macroeconomic assumption has become very popular
rationale for buying both stocks and bonds. On 10/3, the Contrary Asset Allocation Model inferred: “Maybe the slowdown will be short-lived. Bonds remain at risk and stocks could continue to rally a bit further!” That trade is happening and the media popularity/propagation of the HARD LANDING slogan is confirming that the macroeconomic spin is a consensus curve ball. The big slowdown trade has become a “Foul Tip!” At the end of the day (adoration phase) rising rates and the recycling back up in the repricing of the planet will dive an inflation stake into the heart of the earnings lovers. The landing likely isn’t as hard as Goldloxers thought. Big Ben hasn’t tightened tightly enough.Can You Pick the Top Too?
We can send a man to the moon, but we are far from understanding the psyche of the markets. “Cognitively unacceptable” market behavior occurs more often than we expect. No one likes that. The market recycled back up and is having an “unbelievable” final rally. A mania phase is usually “unbelievable.” As I said last week
: “Stocks are in a silly season but we may try to play along with it. This is an Adoration/Mania high. Do you believe it? Mr. Market may make a believer out of you yet. He doesn’t want to tell you about the high…at least not yet. That is his job. Let him do his job.
” We all want a “hole-in-one.” We all want to “pick tops.” We may all want to drink the 2005 Bordeaux vintage now. But it isn’t ready yet. Well this market high may still be in the barrel too. Yes, it has now become much closer to being bottles but not yet? The ideal signal would be a cohesive reversal of the triune (3 brained) bullish rationale. Drink no wine before its time, trade no top before its time.
No positions in stocks mentioned.
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