We are (over)due for a correction
I believe we are very quickly approaching another correction, indicated by several signs such as near universal bullish consent. Like any other market, stocks are subject to the simple laws of supply and demand. When there is no one left to buy, stocks can only move in two directions: sideways or down. Right now, fund manager global equity allocation is the highest since the January 2018 correction. Fund manager optimism on stocks also increased to the highest level since January 2018 as it was a net 53%. Anything above 50% is extreme optimism.
I am also very concerned about the rampant speculative behavior of retail traders and investors. I'm not simply talking about the overvaluation of popular stocks such as TSLA. Take a look at the SPAC frenzy, IPO mania, and - perhaps most notably - the run-ups / short-squeezes of stocks with highly questionable fundamentals (GME, FUBO, AMC, etc.). When "dumb money" starts being rewarded, it should throw up a major red flag. Retail traders and investors are taking way too much risk, with triple-leveraged ETFs and the like. This type of speculation unwinds quickly.
However, this is an incredibly difficult environment to short. But earnings season is starting to heat up, and I suspect that most large caps are priced to such perfection that it would take huge beats to lift them any further. So, I am waiting for a daily close above the VIX's resisting trendline before going long UVXY or shorting any stocks/ETFs.
Good luck and happy trading.
I am also very concerned about the rampant speculative behavior of retail traders and investors. I'm not simply talking about the overvaluation of popular stocks such as TSLA. Take a look at the SPAC frenzy, IPO mania, and - perhaps most notably - the run-ups / short-squeezes of stocks with highly questionable fundamentals (GME, FUBO, AMC, etc.). When "dumb money" starts being rewarded, it should throw up a major red flag. Retail traders and investors are taking way too much risk, with triple-leveraged ETFs and the like. This type of speculation unwinds quickly.
However, this is an incredibly difficult environment to short. But earnings season is starting to heat up, and I suspect that most large caps are priced to such perfection that it would take huge beats to lift them any further. So, I am waiting for a daily close above the VIX's resisting trendline before going long UVXY or shorting any stocks/ETFs.
Good luck and happy trading.
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