I have never based my trading methodology on trying to pick tops and bottoms. That is a fool's errand. But it is very fair to say that I do trade with biases. How do you not? Where do these biases come from? Many traders will talk about "gut feelings". I think that for a seasoned trader "gut feelings" are more than that. I think that they are a quick initial feeling that is based on the total sum of years and years of experience. I do have a "gut feeling" now about our markets and it is not positive. When I get these feelings, I try and validate these feelings with actual data. Is my "Spidey sense" based in reality or am I letting irrational fear take hold? Let's look at a few things. First is the Chinese stock market (Shanghai Stock Index, symbol $SSEC).
Is it rational for a stock market of a nation with slowing growth to double in less than one year? You can argue that this is China and not the US, but you cannot tell me that if China's stock market falls out of bed, we won't get dragged right down with them.
Then I look at how these stock purchases are being paid for. Take a look at Margin Debt:
You have higher and higher amounts of leverage being used to buy all time high after all time high. What do you think will happen if the market corrects even a little bit? You will have margin call after margin call and a true spiral downward will happen.
Does this mean that I should just turn around and sell anything I can get my hands on? Not in the least. But it does give me pause. I need to have a balanced approach and not fall in love with too much on the upside.
Trade well and follow the trend, not the perma-bull OR perma-bear "experts."
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
As the markets inched up higher early on, the COMP made a run towards the all time high price. Once it got close though, the markets turned down and didn't look back. With the slow slide down on lighter volume into the close, we could very...
Today I would like to talk about something not necessarily option related, but to the trading world in general. Trading has gone through some drastic changes over the last, let's say 10 years or so. Before that, trading was still basically a manual process even though computers played a big part."...
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