Did the title to this blog post get your attention? I hope it did. Fear is a powerful emotion that can cause irrational decisions by typically normal folks.
Fear is a distressing negative sensation induced by a perceived threat. It is a basic survival mechanism occurring in response to a specific stimulus, such as pain or the threat of danger.
The market in May was definitely "distressing" to say the least. Its lacked the violent swings of 2011, but sure inspired retail investors to sit on the sidelines. It also encouraged money managers to put funds in low risk asset classes. We are only a few years removed from one of the great financial collapses in recent history, so it didn't take much to instill fear back into the market.
It tends to be moments like these that traders can find a bottom. Just when it looks like the rug is being pulled out and when folks are giving up and succumbing to the suppressing negativity.
Thats when we posted about our "LINE IN THE SAND" on the SPY. Since then, the market is up 8%. Now you will start hearing we moved up on "OVERSOLD" conditions and we are now OVERBOUGHT...
How can a retail trader succeed in such a volatile environment when opinions change like a 3 months olds diaper? Thats easy... follow OptionMillionaires.com (cheesy plug).
We have been a short term bull for some time and pointed out the run in growths stocks from Monday. The market was red, but we thought stocks like LinkedIn (LNKD), Priceline.com (PCLN), and Intuitive Surigical (ISRG) were market leaders and indicated a move higher short term.
Well looks like our thesis proved correct... for now at least. We truly expect some type of move from the FED on wednesday to extend the twist three more months till September. Odd since thats when we think we can start playing puts!
The market has been pricing in a Black Swan event for weeks now. We are pricing in a $GREEN EVENT. What is that? Well thats when all the folks start scrambling into equities for the FEAR of missing out on a rally past the 4 year highs hit in April.
Fear is a powerful emotion, and it will be the catalyst for a ramp higher in the next few weeks. FEAR of not making money, can be stronger then the FEAR of losing money.
We are betting on that and the FED to bring us our $GREEN EVENT. I guess time will tell, but it seems to be working out great so far. More to come tomorrow!!!