check out the attached SPX chart very closely. Many people are very surprised by the recent strength in the market's move up and i totally agree, its VERY hard to chase it and we ALL want a pullback to get into more aggressive longs and that WILL COME sooner or later. The purpose of this chart is to illustrate that this recent rally we saw that actually started in late December as the "fiscal cliff" fears dissipated. SPX went on a upside run in about 1 month of about 7% (see chart).
This rally caught MANY off guard like many previous recent rallies. "Calling TOPS" becomes a very popular thing to do among traders and we are all victims of that as no one wants to be left "holding the bag" at the "top".
Take a close look at the attached SPX chart and you quickly see that the type of rally we are seeing right now is NOT out of the norms. We have seen many like it and in most cases, we see SPX make a big run up with very minor "pullbacks". THe dips tend to be shallow and quick before new buyers come in and take it higher(much to most people's surprise). Calling tops becomes very frustrating for BEARS are want to short and reap rewards on down moves and also for BULLS who want decent dips to BUY.
Its becomes a CHASERS market. Take a close look at what the SPX did exactly ONE YEAR ago where i recall vividly an almost identical scenario as what we are seeing right now. SPX did indeed "top out" but look at WHERE and WHEN it "topped" out! After a 16% STRAIGHT UP run(very tiny fast pullbacks) and 3-4 months after it started in late December/Early Jan.
Are we seeing a similar scenario now?? Obviously hindsight is always a beautiful thing but as of now, i am seeing an eerily similar move to the one we saw exactly one year ago.
Let's not get ahead of ourselves and take it ONE DAY AT A TIME. Lets see where and how things go from here. My goal right now is tune out as much as "noise" as possible as everyone usually has an opinion but the only one's that matters is the MARKET'S so I'm going to trade with the market's flow by taking new trades as they emerge and setup whether it be in BULLISH or bearish patterns.
Benefit of doubt goes to the BULLS right now regardless of how "overbought" we are. Just like "oversold" can become more oversold, Overbought can become more overbought.