"I argue very well. Ask any of my remaining friends. I can win an argument on any topic, against any opponent. People know this, and steer clear of me at parties. Often, as a sign of their great respect, they don't even invite me." --Dave Barry
While the crowd of traders looking for a pullback continues to grow, the dip-buyers continue to buy every minor pullback in this market. The longer the lopsided action continues, the louder and longer the bears argue that a top is near, which creates conditions for a short squeeze and keeps the move alive.
At some point negativity will become great enough to actually make a pullback self-fulfilling, but in this market environment dominated by program selling designed to manipulate sentiment, the conditions favor an extended market to become even more overbought, especially when the bears are so shrill.
It is almost quaint to listen to market players argue against this market based on fundamental factors. It should be painfully clear by now that all those arguments are meaningless until the market decides they aren't. If you are trying to time a market top based on high oil, lack of more quantitative easing, problems in Europe and so on and so forth, you might as well just flip a coin and cross your fingers.
Sure all the fundamental arguments sound impressive. Just to understand the problems in Europe is a monumental task, but the one thing that the bears keep overlooking is that the market doesn't care and isn't listening.
Eventually, we will have some weak action and the media will blame it on those negative arguments the bears have been making lately. The truth is that it isn't the news that is driving the action. It is the action that is driving the way the news is perceived. Right now, the negatives are irrelevant and all the bears are doing is trying to guess when the market will finally decide to shift its focus.
It all boils down to timing, but timing the market based on fundamentals is imprecise and dangerous. If you want to try to time a top, what you need to focus on is the price action. When the price action turns down and the talk about negatives turns up, it's time to talk about a turn.
Unfortunately, too many market players are overanxious to call turns so they keep talking about the negatives and the stupid, persistent uptrend, and they cost themselves a lot of money. They just can't wait for some actual weakness before turning bearish.
I'm not suggesting you stay wildly bullish as the market continues to trend and become more extended. In fact, it becomes tougher to stay heavily long if you are disciplined and harvest gains systematically. On the other hand, loading up on shorts as the market makes new highs has not been a very good way to make money.
We have a little softness to start the day as overseas economic reports were a bit weak. We'll see what the dip-buyers do with it. Small-caps have been lagging lately and that is a worrisome development, but some of the big-caps are holding up the indices and don't appear likely to give up much ground too quickly.
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