The rest will find themselves scrambling towards a very narrow exit. Such is the equivalent of yelling "fire." The smart ones will get out early. However, when they begin to try and sell their positions, no one will be there to buy from them. At the moment, everyone is going into the theatre (buying), and no one is selling. Last week, we discussed how the entire "GameStop" ( GME ) saga would eventually end. Such is something Reddit readers learned the hard way last week. In other words, if you turn your gains into a loss, you aren't managing risk appropriately. The point of portfolio management is the management of risk. While there is nothing to suggest a much deeper correction is coming, there is also nothing suggesting there isn't. Speculation remains rampant, and there are many indicators from relative strength to participation that suggest "something isn't quite right" with the market currently.Īs such, we continue to suggest a modicum of caution with equity risk. While the market did rally as expected last week, the rally is still at risk currently given the more extreme overbought and bullish conditions. With the money flow signal starting to bottom, we added exposure to portfolios this past week. Such suggests that the upside may be more limited over the next couple of weeks.Īs I noted in Thursday's "3-Minutes" video, the rally, and even the attempt at all-time highs, is well within the context of the consolidation process.
While the money flow "buy signal" will likely trigger next week, the market is already trading 2-standard deviations above the 40-dma. Such was indeed the case as the markets successfully tested and held the 50-dma (red dashed line.) Despite the fact money flows remained weak, as shown in the chart below, the market did manage to regain previous highs. Such will be the case until we see money flows start to turn positive again, suggesting some underlying buying pressure." "While I fully expect a reflexive rally next week, that will likely be an opportunity to reduce risk rather than chasing markets.
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