The current market environment is rather strange right now.
Based on mainstream news and online media, widespread fear and uncertainty seem to be at all-time highs, yet the stock market is exhibiting extreme complacency, and appears well on its way toward retesting its all-time historic highs. How can that be?
What is driving these markets higher? All I can think of is that the US equity market is currently dancing to the tune of bullish contrarian strategies in the face of a fundamentally dire backdrop to which EVERYONE (including the general public) is most keenly aware.
For the time being, this contrarian effect in concert with a whole lot of interventionist help from the most powerful central banks on the planet is sealing the bullish deal.
Argh you say, you don't want to go near any of these markets with a ten-foot pole. It's all rigged, and everything will crash again sooner or later.
We can't really blame you for feeling that way. Such an outcome is certainly possible if not likely - but from where say might the Dow crash from - 14K, 18K, 20K, or even higher?
In addition, if the markets do turn down, wouldn't you like to know when it is most prudent to short the new downtrends? Regardless of whether we get another bullish crack-up boom or a devastating market decline, do you really want to be left that far behind, again?
Seriously, setting aside the absurdity, hubris, and folly in taking stabs on calling entries and exits at absolute tops and bottoms, our empirically proven trading strategies are fully capable of recognizing when a major bottom or top has clearly reversed course and has begun trending in a new direction.
Granted, sometimes we have to pay the premium in getting head-faked and whipsawed regardless of which side of the market we are on, but overall, that is a small price to pay when one compares it to feeling completely left behind.
The inevitable head-fake/whipsaw premium is also a very reasonable price to pay for long-term success and staying power, and it assures that we will never take too big a hit or get train wrecked beyond repair.
Ch-Ch-Changes - Turn, and Face the Strain
Sure, times are changing, but change is constant. At times, change is imperceptible, and at times, it appears much more pronounced.
As we move into the balance of 2012, and reflect on what has taken place over the past three years, change and paradigm shifts of significance certainly feel much more intense than typical.
How many times throughout history has humankind been compelled to believe that a catastrophe or that the end of the world was imminent? If you answered, countless times, you would be correct.
However, this time, you may find yourself believing that this time it really is different, and what we are about to experience is the real McCoy - Armageddon by any other name.
Hell, with the Mayan calendar locked and loaded amid its well-publicized countdown to doomsday slated for December 21, 2012, given the current state of rising global unrest, wars, debt, imbalances, corruption and the like, everything is most assuredly going to collapse into a global state of anarchy.
Hmm, I guess just about anything is possible, however it really does matter what the mathematical odds are when such reasonable logic and fundamentals are pitted against a financial system that is much like the Universe, sharing in common with it a highly ordered but randomly violent complex system that was created from nothing.
Think back to 1995, which marked eight years following the largest single-day catastrophic wipeout amid the infamous world-ending Crash of '87, when the Dow was trading near 5700.
Until next time,
Trade Better / Invest Smarter
