My Trading Licks

On Monday morning SPY traded through the long-awaited 280 level, only to be quickly pushed back down. The move, which was well expected by bears and bulls alike, will likely be interpreted as a “blowoff top” that defines the right shoulder in the massive weekly Head and Shoulders pattern… bringing with it a clear message of “look out below.”

If you look at volume today, though, it looks just like another bullish and CHILLY day on the Heat Gauge. The level on HG did jump from -11 to almost zero during the session, so there was indeed quite a bit of selling (aka profit taking, short covering, etc.) going on. But at the end of the day, we’re still not showing any chinks in the armor of this massive rally, an example of pure FOMO (fear of missing out) in full force.

Are the bears always destined to lose at this game once FOMO kicks in? Well, not always. Back in December we experienced FOLA (fear of losing it all), the counterpart of FOMO, in full force and plenty of bulls felt the pain (among them, Warren Buffet to the tune of 24.4 billion).

Time has shown that most bulls always bounce back, where many bears tend to risk it all and end their trading careers in disaster. Is it just the nature of the market to go up that favors bulls? Yes, but there’s more to the picture.

FOLA is a powerful force to be reckoned with, but the effects on the market happen much quicker than FOMO. That kind of fear drives folks to the exits running for their lives, where the other is a slow burn. You can only watch the brass ring go around so many times before you just have reach out and grab it.

The one thing both fears have in common is they both don’t end well. The only difference between them is the time it takes to get there. -MD

Sentiment: HUNGRY – Markets are accumulating at an accelerated rate and big institutional buying is heavy and aggressive.

Volume: 6% – Today’s volume was higher than the previous session.

Real Feel: CHILLY – Bulls were in control of the session with substantial selling under the surface.

Cycle: BULLISH III – Retail investors have bitten off way more than they can chew.

Portfolio: HEDGE – The market is over saturated and long-term investments warrant some protection.

Next Day Move: SIDEWAYS - The probability that SPY will close positive in the next session is 53%.

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