This market has been plenty heavy of late. The big moves I’ve caught recently have all been on the short side, and bearish consolidations abound in the charts. Simultaneously, bullish setups are few and far between, to say the very least.
But let’s look at the bullish case right now. If I’m leaving anything out, please share it in the comments, but here are a few things to consider regarding those who are counting on a lasting turnaround:
– Nowhere else to put cash right now. This is true, and a biggie. With the bond bubble keeping money managers quite leery, and precious metals already correcting sharply from their recent highs (have you seen gold?), the so-called “safe havens” haven’t been immune to the selling either. Equities are still seen as the place to be going forward.
– Multiples are contracting, value players getting more interested. The biggest difference between a technician and the fundamentalist is how momentum is viewed. Fundies look at low prices as entry opportunities, whereas technicians look at them as downtrends which may continue. These days, the value players are seeing better numbers, which may get more of them involved.
– EVERYONE seems to be sitting on considerable cash piles right now. If this market catches a bid, that cash is tremendous potential fuel for a lasting rally. As prevalent as fear has been on the way down, it will also be relevant on the way back up — who wants to miss the big rally? Nobody who runs money, I can assure you. Underperformance is worse than losing money (sadly) in the world of portfolio managers, so you can fully expect cash to come off the sidelines quickly when signs of stability finally emerge.
The bear is still alive and well, with fresh 52-week lows being made Tuesday in every index. Nonetheless, it’s always wise to look at the other side of the trade . It’s responsible, and it either lets you keep defending your stance or it presents reasons to shift (which the best traders are always willing to do).
Keep an open mind, nothing is ever out of the question in this market.
Trade Like a Bandit!
Producer of The Bandit Broadcast