Distribution galore The markets have been putting up rather well. It looks good on the surface. But that is the thing. That's how distribution goes. Things look good so everyone wants to buy! Drum up the holiday sentiments and soft landing story again and yeah everybody is singing songs again when the same people are calling for a crash just a few weeks back at the local bottom. But here are the facts. There has never been a time in history when inflation gets under control without a recession. Don't take my word for it. Research it yourself. Every single time raging inflation gets out of the bottle, it has to be subdued by Mr Recession. Nobody likes Mr Recession but somehow he is the unsung hero. Otherwise normal folks won't be able to buy a lot of things and when it comes to necess
Buyer beware The markets put up another resilient showing on Wednesday to tread the upper resistance levels without any signs of letting up. However, it has to be said that I still do not think that the market is poised for another leg up at this point. A pullback is all but overdue and my concern is the vertical form that this rally is taking as well as really overstretched technicals and overbought levels. In fact I have already mentioned it since last week so it is indeed surprising to see this rally continuing without any meaningful pullback. The levels mentioned earlier of 4605 above and 4450 below still holds. In fact I believe if 4500 is breached, a correction will swiftly take place. Institutional action on the QQQ as well as the QLD are making me more cautious. We have had some of
To the moon and back? Tesla has been a very important component of the stock market and if you want to put it, deeply entrenched in AI which makes up an important part of the new economy. So Tesla is definitely not going anywhere. 'Definitely' is a strong word so I will just tone it down a bit to 'most likely'! Most associate the company to just EVs but I believe it is much more than that to what the company is doing. It may have started as a pure EV play but it is branching out into more to keep ahead of the competition. So to answer the question, the Cybertruck is interesting but it needs more that that to justify a lofty valuation ahead. And looking at how Tesla is cutting margins to increase volume, I believe it is more of a 'capture the market' approach at the expense of margins and p
Pullback? What pullback? The markets kept defying calls for a pullback. And that is despite overstretched overbought levels on worrying technicals. However that is nothing surprising. That is how the market sucker punches the unsuspecting. When you least expect it to and when you thought that the market is not pulling back or rebounding after all, it does. Some call it momentum much like a car slowing down. The question is 'Is this a slowing down before picking up speed again? Or is it a slowing down to reverse direction?' I am undecided at the moment. That is how tricky this market is. So I am not frontloading any moves. Rather I am being ultra defensive and hedged so that any quick downsides will not catch me offguard. And the risks are more to the downside than up. As such, in the immin
Caution ahead The markets are looking really stretched while hitting strong resistance levels. Unless they can really catch a bid and propel upwards on strong buying pressure (I really don't know where it will come from looking at the macro and lack of catalysts), they look about to level out and dive. I am really surprised the markets have held on this long actually. And this makes me more cautious. The Vix is really low as well at levels last seen in Jan 2020. We all know what happened shortly after. The broad market index itself is in a three wave pattern up symbolic of corrections (Looking like a wave 2) and is diverging from the composite index. 4570 is strong resistance with multiple confluence on multiple techniques. We are trending firmly upwards into a critical Gann tim
Safety first The markets have really surprised to the upside in what seems to be one of the sharpest and quickest rebound off the low since a long time. And that is what worries me. When I mentioned in one of my earlier articles (that was only a couple of weeks back) that a rebound was imminent, I don't blame many for doubting. The mood was down and everyone was scared to buy. However, neither do I expect the rebound to be as sharp and quick as we saw in the last three weeks. And it was a notable observation to see the big shorts closing their positions. A top usually do not occur without the bears throwing in the towel similar to the bulls giving up in major bottoms. Now the bullish camp is growing more vocal again along with the bears capitulating. Not the time to be bullish in my
Overstretched rally The markets have done really well ever since the floor seems to have gone only two weeks back. Ever since then, the rally has been very vertical very characteristic of panic buying as well as short covering. I mentioned in my earlier article (about three articles back) when I stated that a market rally is overdue based on market sentiments as well as deeply oversold market conditions and technical patterns and now that the rally has manifested, it is time to realise that the market does not go up in a straight line. This rally has been too fast and vertical for my liking. It has surpassed the levels that a healthy market usually abides by and overstretched by quite a bit such that it has me scratching my head and going over my charts again and again. I might
New highs for Microsoft In yet another show of conflicting signals within the markets, some stocks keep soaring whilst others seem to struggle. Call them divergences, market leaders or market laggards depending on what you are looking at or whatever names you want to call them. But one thing that stands out is that this market is not reflective of one in the early throes of a bull market. Despite what the market headlines are saying with regards to soft landing etc, noise will be noise. But price actions always seem to pick up on the truth and reality. Because despite the attempts by the smart money to move behind the scenes using dark pools and off market transactions to avoid detection, when you know where to look, you know when to be cautious. The markets are too divergent
Pullback imminent The markets have been rallying nicely since the start of November. A good start to the month. However to temper emotions, October set a rather low bar from which to gauge upon. And the markets were deeply oversold with pretty bearish sentiments. Now they have rebounded pretty nicely and as we all know the markets do not go up in a straight line. It was only two articles back when I called for a market rebound and sharp reversal. Well that shows how rapid this rebound has been that now I believe that it has gone up too rapidly and too fast. Depending on how the market pulls back on the next retreat will influence my risk positioning. At the moment, the Nasdaq looks the strongest amongst the indices and the one most likely to go on to new highs as the others go
Much needed retreat before a bigger move up The semiconductor sector has been on a roll ever since last week rebounding strongly off the lows. The SMH looks like it might have a five wave pattern off the lows which is bullish but it faces a hurdle in the form of the upper downtrend line resistance from the July top. As such and especially after such a strong rally in the past week, caution must prevail and a retreat seems to be in the makings. A bullish scenario will see the retreat as a second wave that holds the necesary supports. A short retreat to the 38.2% Fib retrace levels might bode well and see a strong rally into the year end. A deeper retreat to the 50% levels and beyond might still see a year end rally but probably not as strong. Of all the semi names, the usual names suc