With the indices up big since the March lows and number of Covid-19 cases accelerating, the easy thing for market players to do right now is to be bearish.
Not only do we see a market that is stretched technically, but valuations are extreme and the level of stupid speculation is a very common topic of conversation. The negative narrative hasn't been easier to construct since the Covid-19 crisis hit the market back in February.
The biggest obstacle for the bears has been a huge amount of stimulus created by fiscal and monetary policy, but the pessimistic argument is that that liquidity can't fix many things that have been broken and the market still needs some periods of consolidation.
There is a market saying that the hardest thing to do is often the best thing to do. This thinking is based on the logic than the market is less likely to do what seems logical and reasonable. It is the folks that are positioned in a contrary way that are likely to profit.
Although determining what the "hard thing" might be is highly subjective, there clearly is a large group of folks who are absolutely confident the market cannot continue to trend in this manner for much longer. They have thought the same thing for weeks, but more and more evidence is piling up of why the market is in trouble every day. The thing they are missing is the price action to confirm their negativity.
There is no question that the character of the market will shift at some point, but the trillion-dollar question is, "When?" The easy thing is to anticipate the disaster and prepare for it right now. The harder thing is to find new opportunities and to keep on pushing as long as possible.
It should be no secret that I'm a fan of staying with the trend until the bitter end. I'm still finding good stock-picking opportunities and find the action of the indices to be misleading. There are groups such as precious metals, special purpose acquisition companies (SPACs) and biotechnology that continue to offer good opportunities..
Anticipating market weakness has greater intellectual appeal to many market participants. It just feels more erudite and insightful to focus on what can go wrong. Who wants to be on the side of these goofball Robinhood traders who are buying bankrupt stocks or picking stock symbols from Scrabble tiles? Those folks deserve to lose their money and they certainly will at some point. That is the easy bet.
The harder bet right now is to keep looking for opportunities. It becomes more difficult as the market becomes extended and negative headlines swirl, but that is where the money is.
If you want to play it safe and protect capital, then a bearish posture makes sense. If you want to be a contrarian and aggressively trade, then you need to stay selective bullish.
We have a mildly higher open on the way as market players digest the news and try to figure out if negatives are going to matter.
"easy" - Google News
June 22, 2020 at 06:26PM
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It's Easy to Be a Bear, but Then Again... - TheStreet
"easy" - Google News
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