“Humans don’t like change. We fight it. It scares us. So we create the illusion of stasis. We want to believe in a world at rest, the world of right now. Yet our great paradox remains the same. The moment we grasp the “now”, that “now” is gone. Each nanosecond different from the last. Time forces us to grow. To adapt.-Because every time we blink our eyes… the world shifts beneath our feet.” Touch
The above quote is from a TV show called “touch” and it is important to understand when trading the stock market. Traders don’t want to believe the “trend has changed” and they fight it until they are forced out of the trade (Both sides). The market moves in cycles as does investor sentiment. It takes time for time for traders to realize and accept that the SPX stopped going down in early October. They continued to short and short until they were forced to cover.
Now we have seen the SPX rally for almost 3 weeks and the ones who were fighting the short side are now bullish-right when the sentiment cycle is about to peak. Things aren’t going to be different this time and the sooner you accept that “things have changed” the sooner you will find yourself on the right side of the next direction.
Below is a chart of our intermediate term sentiment-notice how everyone was bearish at the exact lows and bullish at the exact highs. That is probably the only thing you have to pay attention to, as it is the only thing that doesn’t change. Investors/traders pick the exact wrong time to think “this time is different”. The sentiment cycle is about to change-and this time won’t be different-again.
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