The good and bad of it
I am going through my various market screens right now looking for what is happening internally with the market. My last piece ended with; In the twilight zone, sounds like a good time for some rising stop prices, because it is a very tricky time and emotions are running wild. I was going through my "stocks rising on above average volume" screen and noticed soooo many banks breaking out on volume. Wow - that is huge for the market right?
Uhhhh - it has happened before and didn't they look like they were breaking down a week ago? This is the hardest part of having conviction regarding a strategy. The market is retesting the early December highs (which was considered impossible a week ago) and the right groups are kicking on all cylinders (banks and techies). Why would anyone want to fight the tape, especially after the pain of the past three years? The answer is that using rising stops or taking advantage of the rally to get more "comfortable" in your portfolio is not fighting the tape.
Now if I were aggressively shorting - THAT would be fighting the tape. Remember, you don't have to be 100% long or short all the time. The tape is moving higher and the near-term stochastics are just entering neutral zone, so aggressive selling doesn't make a ton of sense, but the only reason I had to expect a bounce (oversold levels and psychology) aren't there anymore so aggressive buying doesn't make a ton of sense either.
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