Clearly, I was quick to make the call for a new up move before I got the desired close above 11550. That Thursday had its own weekly worry, skewed the scales a bit and then, US happened as the lead names collapsed spectacularly. This always happens and despite all the years spent in the market, I missed the basics - never jump the gun, let the market do the hard work.
Now, with my stop loss just a whisper away, Monday looks set to stop me out. Having jumped the gun on Thursday last week, I'll wait for the close on Monday to step back and lick my wounds, having learnt my lesson, but still unable to promise never to repeat the mistake. Trading is always about herd sentiment and sentiment has a feedback loop with psychology.
Speaking of psychology, if enough people believe that the economy is doing better now than before, a recovery ensues by virtue of that belief. So, from a place of near-death to one that was deemed not as bad, the market psychology suddenly shifted gears to discount nebulous growth and improvement. That probably is the froth that lifted the midcap space and continues to this day. Reality however might be quite different as markets are prone to the excess of momentum swings. And as I indicated earlier, with so much going on in black boxes and with no clarity of the various interactions between the black boxes, even a moderately long timeline is clouded with conjecture.
In earlier periods, the hope for a better tomorrow was held by the majority but with each passing decade, the concentration of wealth has meant that more people are convinced that their tomorrow will at best be like their today and at worst like their yesterday. That is where the perpetual growth paradigm loses its momentum and its attractiveness. But, that's really a long term argument.
With the economy as the elephant and the mandarins of power, the six blind men, I have no faith that individually or collectively, they will describe the full and correct picture, especially as they have been feeling up a rocking horse all this while.
The author is an independent trader-cum-blogger and has worked at leading brokers on the institutional sales desk over the course of his near three-decade long career in the stock market.
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