In spite of the 5+ year rally in stocks to record levels, plenty of company's have struggled, gone belly up, and seen their stock prices head to $0.00.
Look at the chart below and tell me what you think. This stock looks to be headed for bankruptcy?
This chart is a falling knife. It may bounce at some point, but the long term trend is down, and will remain that way until it reverses course. Going long here, even after the massive move lower, would be much more risky than simply going with what has worked for the entire duration of this chart.... going short.
If this chart is so bearish, why, when flipped around doesn't it look "bullish" to so many of the professionals out there?
In case you haven't figured it out yet I simply flipped an S&P 500 $SPY chart. The same chart the professionals are telling you has topped. The same chart the professionals have been telling you is ripe for a massive reversal. The same chart people look at and want to short. I don't know about you, but the first chart looks like a great chart to short. The second chart looks like a great chart to be long.
It's amazing how emotions can cloud the vision and judgement of traders/investors. There is a need to be the first to call the top in this market after its amazing rally off the lows in 2009. I imagine its good for the ego, because calling tops in this market surely hasn't been good for the portfolio.
I think what's even more amazing is the level of pessimism just two days removed from record stock prices.
Going long a stock in a tailspin, catching the falling knife, those trades rarely work out. Going short a chart that has a clear and winning trend to the upside... its a futile attempt and doing something so many have tried and failed to do the last five years. Lucky for most of the top callers, they have no money in the game. They are Monday Morning QB's who consistently ignore their own failed advice and enjoy taking jabs at other traders/investors opinions, and when things get too hot, they disappear to collect whats left of their shattered ego's.
Perhaps I'm wrong. Perhaps the market has topped. I'll wait for chart confirmation first. I don't need to be the first to call the top. As many of the pundits are finding out these days... if you cry wolf long enough, even your sheep won't listen to you anymore.