By The Disciplined Trader
As the markets climb higher I have sat on the sidelines and watched this amazing run up. Yesterday’s short-lived decline in the FTSE 100, on bad economic data, came after a 10-day winning streak and the markets have resumed higher today. It feels like nothing can derail this mighty bull. Calls for a correction are growing louder and what I find troublingis that despite the bad economic data the markets just don’t seem to care.
In the last two days there have been four reports that were worse than expected: EU GDP; US industrial production; US housing starts and US jobless claims. Yet people continue to buy this dreary news!
Ignorance of the broader macro picture has been blissfully rewarding, but why? It could be the sense of security offered by perpetual stimulus, but isn’t that too good to be true? Apparently not for the stock market, it’s become a one-way bet as echoes of 1999 eerily spring to mind. I was trading technology stocks back then.The market kept rising day-after-day, bad news was ignored and complacency became the norm. Until finally, on a normal trading day in the year 2000, momentum ground to a halt, the bandwagon back-fired, buyers stopped buying and the stock market crashed back to earth. It was something I’ll never forget. So ‘let the buyer beware’in 2013 that if this irrational behaviour continues, we could see another crash soon.
Therein lies a warning from our stock market past and I have learned that this type of behaviour is dangerous – the illusion of a healthy market is but that - the facts are very different! I believe the markets are overshooting to the upside, so I will remain on the sidelines until I spot a good opportunity, the obvious resistance in the FTSE being the July 2007 high of 6754.
The Disciplined Trader is an average guy who has little fundamental knowledge of the financial markets, yet he consistently makes money trading. He simply applies the basic rules of trading discussed in bettertrader.co.uk and executes his trading techniques applying great discipline.