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So what
happens when there is lots of bad news out? If anyone was going to sell their
positions because of worries about the "geopolitical situation" or oil
prices, wouldn't they have done it already?
Every time
the market is in a strong trend, in either direction, it eventually reaches
an exhaustion point. That's the point where everyone that was worried about
the news already sold and only the late comers, the panicked investors, are
left to sell. You can recognize this point, usually, by the large gap down on
high volume, after a large trend, and the market closes positive or strong.
It looks like we came to that point on Friday.
I don't
think there is a person in the world that is celebrating the war in the
middle east. Well, maybe some people are. I think most people know it is a
powder keg waiting to blow up. If that's common knowledge, those that are
worried about it, probably already sold. We saw that on Friday for example,
lots of stocks were hard to borrow for shorts. We were having problems
finding some stocks still in inventory.
My point is,
be prepared for a profit taking bounce on Monday and Tuesday. It may not last
long,or it may cause a whole trend reversal. Do not think that just because
this looks like the end of the world the market will free fall.
I could talk
more about the "geopolitical situation", the new key word, but I am
sure you are getting reports from all directions and since this is a trading
newsletter, you don't need it from me. I do think, however, that most smart
investors have been aware of this situation for a long time. Basically, the
war is out in the open now, not just "about to happen". The powder
keg that we all knew was there is in the process of exploding. I don't think
it is a surprise.
Ever heard
of "buy the rumor and sell the news"? This may be the opposite now.
Everyone was selling the rumor and may now buy the news.
Hope this helps,
Shay Horowitz - ShogunTrading
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