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 opinion but to be cautious.
The market is now gearing up for two scenarios in my opinion. A final thrust upwards in a FOMO push into the year end or even early next year. But even that will see a pullback in the near term possibly this week or next before that push. Or the top is in and July was that top. In the latter scenario, the next leg down will be sharp and swift. (This will be the moment when the bulls realise they are not on the correct side and start repositioning. There are not many shorts left to cover and stem the selling. The bears will realise that they were correct all along and start positioning again. Welcome to the proverbial third wave in the Elliot wave world!)
What makes me lean towards the latter scenario is what is not common in the retail sector but something the institutions use to guide their risk positioning. Gann theory. Gann uses time clusters and angles along with patterns to analyse market movements. When married to Elliot wave analysis, it tends to highlight when to take note of market risks.
Aside from the divergences seen in different markets which is in itself a warning sign, Gann theory highlights a time cluster this week and the way it works besides working out the angles and without giving too much away, the market is trending sharply up into that which gives a 75% probability of a pullback very soon. The other 25% will see a gap up to power even higher up.
Based on all what I mentioned as well as macro, I have started being cautious and adapted my risk positioning accordingly. It is time to protect capital in a safety first approach. Even if market rockets upwards, I am ok with it. So it is time to hedge portfolio and stay safe.
With regards to Nvidia, the markets are in too precarious a position to take pot shots. I rather not take risks. Knowing institutions, I am worried of a pump and dump scenario. So I rather stay safe.
Disclaimer: Please kindly do your own due diligence as this is a sharing article and in no means financial advise. I am just sharing my opinions and thoughts.
Thanks for reading my commentary. Hope it helps!
Stay safe! 😊
$Semiconductor Bull 3X Shares(SOXL)$
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Don’t be fooled by futures. Buy buy buy! Future so bright you are gonna need shades.
Can we get a 5% pullback today?