Wednesday, September 26, 2007

Some Early Warning Signs

In scanning thru chart setups to trade i can't help but notice that there's of a lot shit stocks that are making huge moves, especially in the chinese names. Now, in my experience this kind of speculative behavior means two things.
1: Hedge funds are playing catch up by ramping up momo names to juice up their sagging portfolios.
2. We are closer to the end of a rally. That doesn't mean that we sell-off hard and go into a bear market. It just means that we'll probably start a correction. (mostly likely scenario).

That's how i use excessive speculative behavior by spotting signs of complacency, greed and exhaustion and to start to trim down long exposure and develop a more conservative posture.

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