“The market can stay irrational longer than your account can stay solvent.”
I love this phrase for so many reasons. I say it to myself anytime I just can’t believe what the market is doing — when things simply don’t make sense or I wonder just how much further this can go or how much longer this can last. I have to remind myself to take a step back and not fight the tape and go with what the market wants right now.
I am a small fish in a very big ocean and fighting the current is futile.
I am specifically feeling this way as we have now reached the 61.8% Fibonacci retracement on the SPY and it looks like we could keep going. Definitely not in a straight line and definitely not without its heart-clinching liquidation drops.
What is even more astonishing is that most of the big earnings reports this week are being rewarded with large gaps up. This is great news since it is otherwise a disaster when markets fall. It is a perplexing time.
So again, if we are putting our own opinion of what should happen in the markets onto these big moves… we won’t be very happy with the results.
Let’s be happy for the success of the market, the recovery from the downfall, and the five-something trillion dollars that have been pumped into the economy from the Fed. Despite the absurdity of this environment, I am happy that we are getting these earnings results because the alternative would be terrible — albeit more understandable.
What message would it be sending if these earnings reports from major companies were met with price implosions?
I’d feel the trillions of dollars were completely wasted and did no good. I’ll admit I think an implosion will still eventually happen. But for now, in these first unknown rounds of earnings, it’s working. Taxpayer money and new American debt was “worth it” as I begrudgingly accept.
Things will change at some point — the party won’t be as fun, the news will be bad, and we can finally feel better about taking those shorts as that appeases our sensibilities. But that will be a dismal time for so many others out there. So it is worth letting the market offend our logic for a little bit longer.
Let’s just hope the next downturn comes with a soft landing.