Memo to Bears: Stop Shorting This
Even before the latest bull run began in March of this year, people have been falling over themselves to go short on the move. Now, it looks like that could finally be justified.
On a surface level, the market is obviously overextended. It has generally gone up too far, too fast, and the respective indicators show this as well. Some believe that this is a good time to go short on the markets.
While I do not believe it is a great time to go long (particularly on the most overextended sectors of semiconductors and tech,) I also do not believe that going short right now will work at all.
The bullish side has a lot of momentum. Remember last week with its sudden swings downward? Those have now been negated.
It will (probably) take one of two things to allow a correction:
-time, to allow the bullish momentum to fade
-a sudden drop
I believe that people are going into this with unrealistic expectations of the drop. Why? We just had the 2022 bear market, which was one of the quickest drops on record. It was punctuated by sudden rallies followed by even more steep declines, as you can see on the chart.
Even before that, we had the 2020 crash! If that is not sudden, I don't know what is.
Looking back further, the 2018 correction was, at the time, known for its wild swings (but is usually ignored today.)
Not all corrections have to be sudden, though. The 2015-16 market was an exhausting period of consolidation. While there were steep drops, they were associated with months on end of stagnant prices.
The 2008 crisis is known for the Sept-Oct crash, where stock prices suddenly fell 30%. Prior to that, though, it took about a year just for the market to inch down 20%.
The whole point of that is that traders may now be used to volatile price swings that don't actually have to happen.
There is no rule set in stone that says when the stock market index runs up too fast, it must immediately drop 10%. I think that it's entirely possible that instead of a quick correction (as we have seen all too often,) we will be in for a more "boring" and perhaps relaxing market.
The last three, or even the last five, years have been crazy in the economic world in terms of price swings, world events, etc. Perhaps we will finally get a break from this deluge of news and see more stagnant prices... at the expense of bears?
On a surface level, the market is obviously overextended. It has generally gone up too far, too fast, and the respective indicators show this as well. Some believe that this is a good time to go short on the markets.
While I do not believe it is a great time to go long (particularly on the most overextended sectors of semiconductors and tech,) I also do not believe that going short right now will work at all.
The bullish side has a lot of momentum. Remember last week with its sudden swings downward? Those have now been negated.
It will (probably) take one of two things to allow a correction:
-time, to allow the bullish momentum to fade
-a sudden drop
I believe that people are going into this with unrealistic expectations of the drop. Why? We just had the 2022 bear market, which was one of the quickest drops on record. It was punctuated by sudden rallies followed by even more steep declines, as you can see on the chart.
Even before that, we had the 2020 crash! If that is not sudden, I don't know what is.
Looking back further, the 2018 correction was, at the time, known for its wild swings (but is usually ignored today.)
Not all corrections have to be sudden, though. The 2015-16 market was an exhausting period of consolidation. While there were steep drops, they were associated with months on end of stagnant prices.
The 2008 crisis is known for the Sept-Oct crash, where stock prices suddenly fell 30%. Prior to that, though, it took about a year just for the market to inch down 20%.
The whole point of that is that traders may now be used to volatile price swings that don't actually have to happen.
There is no rule set in stone that says when the stock market index runs up too fast, it must immediately drop 10%. I think that it's entirely possible that instead of a quick correction (as we have seen all too often,) we will be in for a more "boring" and perhaps relaxing market.
The last three, or even the last five, years have been crazy in the economic world in terms of price swings, world events, etc. Perhaps we will finally get a break from this deluge of news and see more stagnant prices... at the expense of bears?
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