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The so-called suckers rally, how are you playing it?


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The current stocks rally has been called the suckers rally in several quarters, except the main stream media of course.  Several notables are advising us not to chase it.  I'm not a day trader so I'm staying out and waiting in the tall grass for the eventual plunge (when it is confirmed).  I am wondering what others on the IG Forum are doing, are you day trading this up or sitting it out until it resolves?  If you are Long how far do you expect this rally to go and are you regularly taking profits are holding Long positions longer term?

 

Just curious as to the general feeling, would welcome any thoughts.

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Hi 

My opinion for what it’s worth :

Looking specifically at the US 500. On the daily chart I can’t really find enough encouraging divergence signals to feed my bear fever. Momentum looks like it is fading significantly yet price action stubbornly resists a retrace. I thought we were underway on Tuesday when the price broke below 2158-2160 support range and I was looking to possibly get in some short action if a retouch of this zone occurred – it did retouch but far too quickly for my liking, giving it a false breakout feel so I left it alone. Staying on the daily chart, I notice that Bollinger bands show a bottleneck has formed and my understanding of this is that this low volatility almost inevitably leads to high volatility. But I can’t see high volatility forming with and upside move. I think at this point even the bulls would welcome a decent retrace to find an opportunity to add to longs or find a re-entry point after profit taking. So my feeling is that any significant move from here will be down. But when will it happen? Perhaps NFP figures later today could provide a good catalyst for a decent move away from the current range. Whether it will be bull or bear action remains to be seen. Although I still feel any upside move will be limited until a decent retrace to the 2100-2120 area has occurred.

Interestingly, the weekly chart shows some decent divergence of both momentum and the MACD histogram which is encouraging for those looking to get short, but personally I’m finding it difficult to read the situation with any confidence so will probably just stay away for now (despite nagging FOMO twinges :smileyhappy:)

See attached charts. I usually use PRT but here I’ve just posted regular IG ones here for simplicity.

Mac

sp500_daily.png

 

 

 sp500_weekly.png

 

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Thanks for that , like the pic BTW, is that your actual dog?

 

You opinion is worth as much as anyone's, all grist to the mill and gratefully received (by me at least...)

 

I empathise with your views and agree that to stay out is hard when you see so many point on offer going up but I really do believe this is a wally rally and the end game for stocks.  Surely the CBs can't keep spinning this tired old yarn?  Surely deteriorating top-line and profits is more important than CB financial engineering and NFP?

 

In the meantime I feed my FOMO beast by focusing on other markets and waiting for signs of sanity returning to Bonds and Stocks.

 

It does seem that there is no such thing as bad news on stocks anymore.  High NFP today brought a rally in stocks (healthy economy?  But what about earnings, surely the market does not believe the hockey stick fantasy?).  USD also rallies on, I guess, an increased expectation or a rate rise.  Fundamentals traders must be pulling their hair out...

 

Fortunately as a technical trader this fits my projections of a final fifth wave up into the 19000 area for the Dow, after that, well let's see.  The air is getting pretty thin though...

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Cheers  – Yes that’s my dog, a Rottweiler. His name is McDog :smileyvery-happy:

Was sitting in the garden one day and on a whim stuck my sunglasses on him for a laugh. But rather than look comedic he just sat there looking like Joe Cool so I took a quick pic.

 

As for the Charts – yes, NFP has given indices a boost. Will it be enough to break out of the upper range for another upward leg? I still doubt it. I agree with you, the air is too thin right now. The bulls need to pull back and regroup for another charge. (Although S&P testing the recent high as I type)

Another thought I had (and this may just be my natural cynicism) but I don’t see the ‘big’ drop until after the US elections in November. The incumbent government will not relish entering election campaigns with stock markets crashing and will do whatever they can to ensure a rosy picture of the economy pervades until the ballots are in. Not that I’m in any way suggesting that governments are devious enough to manipulate markets. God forbid such underhand behaviour from our fine politicians!!!

Mac

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LOL yes I can't deny I share you cynicism  and I had also thought the US Presidential election might be a trigger but only if the Donald gets in as Clinton will be seen as more of the same vis a vis central bank policy.  I'd imagine it is as much about the central bankers not wanting to create a **** storm this side of the election and of course protecting their own highly inflated reputations.  That said the markets have a habit of making fools out of everyone, especially over inflated central bankers and politicians so...

 

What might set the hares running is if the Donald starts to pick up polls momentum, of course there are another round of earnings to come during the election so if this rally doesn't run out of steam long before then I can see Q3 earnings plus the election being the kind of troubled waters needed.  Of course, being doubly cynical, I could see the Chinese devaluing the Yuan just as the US goes into Presidential transition... 

 

Thanks giving Turkey anyone?

 

Meanwhile Gold is looking good for Bears, although it is hard to see what USD is doing and Oil may be in for a bounce, after a small retrace so plenty to occupy us elsewhere.  In FX Check out USDJPY for another drop and USDCAD will drop again if Oil rallies.  AUDUSD seems to have keeled over as Copper also heads south

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