Time Is on The Bull's Side

Earlier this week when the market began to rebound many argued that the market was a buy because sentiment was too pessimistic. I reminded readers that time is an important aspect of a decline as well as the level of sentiment. At the time not enough time had passed for participants to act on their bearish feelings.

Today is day eight since the market took a sharp move south and the more days pass the more people capitulate to the negativity. Monday would be day ten of the decline and that would make us maximum oversold. In other words we are late in this decline and the time is approaching where one should try and see the positive, for a trade.

2 comments:

PJ said...

I wouldn't be surprised to see a 3-day bounce mid next week, but on the intermediate term, don't you think this run up from July 1 to mid-August calls for a ~6-week decline up to October earnings season? Coincident with the reality of entry into a recession?

Tsachy Mishal said...

One would think so, but these cash takeovers and buybacks are throwing a wrench in things. Eventually the recession will weigh on profits and put an end to this but for now it could hold things up.

Im probably going to play for a small rally and then step back into market neutral. I would rather buy companies that should do well in a slow economy and pair it with an S&P short than have an outright short given the buybacks and takeovers.