Even though both small caps and Nasdaq are below their recent March highs, its amazing to see extreme greed in the market. This greed is being measured by the put/call ratios 10 day MA and fear greed indicator. This kind of sentiment in conjunction with a mature Elliott wave pattern and approaching IPM model turn window, suggests that we will see a correction in the market very soon.
Here, want to be clear that the correction does not mean a new bear market. But rather a decline to get rid of optimistic extremes from the markets. Stock market's decline and rally symbolize social-sentiment. When this sentiment reaches optimistic extreme, buying power is exhausted. And therefore, potential for further rally is limited.
Right now, we are at a similar point. Once we get a correction, rally will resume. This rally could continue till next weekly IPM window, which is few months away. Therefore, we are in for a long-term rally.
As for the current market, caution is warranted as decline could be sharp. Hypothetical scenario:
Trade Options Matrix (TOM) - Experimental: Will take an aggressive short trade
Trade Equity Matrix (TEM): Will remain in cash till the bottom and will enter long within IPM bottom window on a trigger.
Here, want to be clear that the correction does not mean a new bear market. But rather a decline to get rid of optimistic extremes from the markets. Stock market's decline and rally symbolize social-sentiment. When this sentiment reaches optimistic extreme, buying power is exhausted. And therefore, potential for further rally is limited.
Right now, we are at a similar point. Once we get a correction, rally will resume. This rally could continue till next weekly IPM window, which is few months away. Therefore, we are in for a long-term rally.
As for the current market, caution is warranted as decline could be sharp. Hypothetical scenario:
- Decline this week into Monday
- Rally next week into Fed meeting or Thursday
- Decline final decline into IPM bottom window
Trade Options Matrix (TOM) - Experimental: Will take an aggressive short trade
Trade Equity Matrix (TEM): Will remain in cash till the bottom and will enter long within IPM bottom window on a trigger.
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