By The Disciplined Trader
It seems my warnings of dangerous stock market going-ons in my last report were justified. The bottom fell out of the market last week and the FTSE turned down sharply in mirror-like fashion to the technology bubble bursting in the year 2000! I have seen it all before - markets can’t climb continuously without a severe pullback or crash. So after more than two weeks the FTSE is down around 7% - is that the rumblings of the great bear finally awakening after a very long sleep? I believe it could be.
The bull market has run up too far and too fast over the last four years with no real foundation other than sentiment and optimism of a global recovery. And yet despite all the stimulus and positive thinking the economy is still weak and the debt gaps too wide to bridge.
Unfortunately I didn’t manage to trade the initial pullback, the reversal was sudden and sharp, which leaves me pondering on what’s next. It’s tempting to go long here but the obvious ‘buy the dips’ trade doesn’t seem so enticing and after such a sharp move we may see some backing and filling. The FTSE is oversold on the RSI on the 2-hour chart, but the underlying current of the market feels different this time, the length of the rally could dictate the length of the correction and the writing is on the wall. It could be different this time.
The market is proportional just look at the Nikkei, from boom to bust. So I’m in no hurry to trade, I’ll take my time and plan my next strategy so when an opportunity presents I’m ready to take it. Truth be said, I would rather go short than long in this environment so if the FTSE rallies to the 6600-6700 area I’ll be looking for an entry point to go short.
Comments