Whether you are a bull or a bear, you gotta admire the resilience shown by the markets this week. Of course, you appreciate it more if you were bullish the entire week :). But the bottomline is the market just plowed higher throughout the week, irrespective of whether it faced good news or bad. At the end of the week, we are left pretty close to YTD highs. But this is also close to the third most overbought the markets have been in the past two years.
Since its Friday, let's just throw away our charts for the moment. Moreover, like always, I will be back during the weekend with the charts to try and see what lies in store for us the coming week. Let's just think how we happened to get here. Middle of the week, everybody was shouting - including me, and I still stand by it - that the market is overbought. The bulls expected a pullback and were ready to buy on dips. The bears of course wanted a pullback too. Using the benefit of hindsight, it is easy to see now how the pullback never happened. In one of the posts during the week, I had mischievously raised the question that if both bulls and bears expect a pullback, does the pullback really happen? I guess we got a definite answer to that one. Interesting, isn't it??!!
Now, let's take it a little further. Look around you today. Twitter, whichever blogs you follow. Does everybody seem too optimistic? Is everybody buying a little too fearlessly? Are the majority taking the market for granted? If the answer to all of the above is yes, then you can expect the pullback to happen anytime.
Personally speaking, I didn't do much today. On Wednesday, I wrote I was tired and weary of the markets and in need of a break and I have pretty much done just that both yesterday and today. I got out of PAL at 4.35 and as posted earlier today, took a small position in DUG at 12.28. I did this as I was expecting a pullback in oil. It turned out that I called the top in oil almost perfectly as it pretty much never touched the price at which I bought the inverse ETF, but at the same time, my double inverse ETF barely went higher after I bought it! It closed at 12.20, so no damage done, at least not yet.
I will be back during the weekend with the weekly trading results, a post on what to expect the coming week and also a watchlist for the next week.
Take care and enjoy the weekend!