A 200+ plunge is looming

The market is up and up and the sentiment is quite euphoric. It seems everyone is happy right now and nothing can stop the uptrend at the moment! What a drastic mood change can occur in 2-3 weeks time. Back then in late Dec, it seemed everyone was depressing and no one dared to buy. So each up day at opening was brought down to lows at closing. Nothing could stop the downtrend at that time. Did I say the market mood could change at a blink of eyes and we should not be so scared and depressing back then? If you have forgot, then read here! Now it is just the mirror image and exactly the opposite!! Each weakness at opening will be met with eager buyers to step in and the market is so that floating higher and higher. What to be scared about, you may ask! Probably the majority of people have missed the boat and dared not to buy when the market was at abysmal bottom 2-3 weeks ago and now they must catch up. “OMG, how can I be left behind?” I’m hearing many whispering to themselves. As always, they could be right and I could be wrong but I think they are making a suicidal move at the moment to chase highs now. Remember my suicidal kiss talks back in Feb/Mar time last year? (see here and here). The market now is eerily resembling the makeup back in Feb/Mar time when it made several times of suicidal kiss before finally coming out the woods. We are approaching this point now and the most likely line in the sand is probably the 50 DMA for S&P and as of today, it is sitting around 2630ish. If we indeed see another suicidal kiss, then we can easily see a 200+ points plunge for S&P! “I cannot believe this could happen”, you may despise and you indeed could be right as I have already claimed!!😋 Two weeks ago I also heard similar contempt when I said S&P could bounce back towards 2600, a 200+ points jump. Of course not many people could believe either. We may not at that exact point yet and people may still enjoy a few days of happiness. But reckoning day is approaching fast. One caution to note though. Don’t take the 2630 as the exact point for the direction change. Actually back in Feb/Mar, S&P made twice fake breakouts through its 50 DMA and then back down soon after. So when the market is in the mood to move, it often overshoots a bit before changing its direction. Therefore never never take any TA as a rocket science for precision.😏   

As I said before, I used to be also a FOMO guy, chasing highs or lows, following whatever the crowd was doing. It didn’t work out well as you can imagine as I usually bought highs and sold lows. Now I have been transformed and become a contrarian against the herd. It is not an easy thing to do to be very honest with you. It really has to take some gut and courage to do so to buy when everyone is selling and to sell when everyone is buying. I tend to be early and my timing is not always great, but the ultimate ending is often quite enjoyable by being a contrarian! I’m not asking anyone to follow me of course and it is often an unpleasant experience at that moment but at least I can share my experience here from time to time. So I’m still grateful for you to at least read what I’m writing here. In the past week or so, I have been persistently “talking down” the market to my friends and advised them not to chase. Apparently I’m too early this time as well. So if you are one of those “victims” following my advice to either sell a bit earlier or not buying in the past week, I feel your “pain”! But I have to say this: it is much better to miss a bit than being caught up in a big move at the wrong time. The pain for the latter will be several times more intensive. It is a lot easier to sell when it is moving up and buy when it is moving down as a general rule. One thing with certainty is that no one can consistently pinpoint the exact top or bottom. If someone tells you that he or she can do that, then he/she is either a big liar or schizophrenic! 🙈

Since we are talking about timing, let me just update you about the natural gas status. I posted my blog on NG just a few days ago regarding its coming fast plummet in the past few weeks but I thought NG could be due for a dead cat bounce at least. More specifically regarding the leveraged ETF for NG, BOIL that I thought it would move up to $30 soon (see here). What a timing and I'm too conservative! NG shot up 15% on Monday and BOIL up 25% to $32 immediately on the next trading day after my posting. While the exact timing is a pure luck for sure, one good lesson we can all learn is to NOT CHASE at either extreme end: either short at lows or buying at highs. This is especially important for something as volatile as NG or other commodities. The volatility is so high for NG, I call it the mother of craziness or at least one of them!