Slow Rally

The rallies we have seen in recent weeks do not have the same zip as the rallies we saw last summer. Getting too bearish the past two Summers has been a costly mistake and it seems that market participants remember this lesson. This is likely stopping the bears from pushing too hard and finding themselves caught offsides. The result is smaller, less ferocious moves than we saw last summer (I know its a little odd to call these moves less ferocious).

I have been complaining that the Rydex and Investors Intelligence indicators refuse to fall into place. The Investors Intelligence indicator came out today showing the bulls being just about as low as they were last Summer and Fall. The difference is that the bears are not spiking into territory that usually kicks off an intermediate term rally. Once burned, twice shy. I expect this to continue and believe buying oversold and selling overbought will work this summer.

5 comments:

Tamas said...

What we need is 2-3 years of  down market to clean out smaller funds form the market benefiting 
from the always rebounding US markets no matter how bad their entry points are. Unlikely will happen in the near future but I d be willing to take some pain to see the shrinkage of the self proclaimed narcissist "market gurus". Eventually the market will evolve to benefit only  real long term holders and some short term traders with delta neutral strategies.

Onlooker from Troy said...

Wow, look at the put buying at CBOE.  Very high for a day like this.  Considerably different than the ISE.

Tsachy Mishal said...

I would ignore both if they are diverging by so much. the answer probably lies somewhere in the middle.

Tamas said...

The perfect scenario would be  6 to 8 months down drifts accompanied by dividend cuts followed by some slow shallow rebound and repeat. These easy entry points like we had in the past few days keeps to many semi professionals with some money alive. The key is a drifting market without momentum.Thanks for reading. Have a nice day.

Shubh Desai said...

Traders are as important as Investors. We need both.