Stock Markets Ready to move and here's Proof! - Trading Journal (1.17.20)
It turns out the AAII sentiment provided during the past week was a glitch and there were not 100% bullish based on survey results, but boy was it a difficult week for bulls as markets indexes closed red for the week. Friday did not fair well at all as indexes closed at the week's lows. Yet I am curious where it will go next.
Lack of Shorts
Market shorts are close to near time lows while market prices are at all time highs. What is useful to have shorts is that during times where demand for stocks maybe dwendling anyone who shorts will require to buy shares back. This buy back is gives demand for the market, but at times when there is not many shorts the demand is less.
Call Options Peaking at All Time Highs
Specifically call buying from retail traders are at all time highs. With all the stocks that are at or near all time highs it is clear that as of now retail traders are optimistic. When optimism is at its peak complacency rains.
The gamma in the market is also near a peak. High gamma means volatility rising in the near future. Interesting to note from chart above that prices can retrace but over time will likely reach new all time records.
In my opinion a pull back in the markets will likely be bought and new all time highs will be reached. How long the pull back will be and how steep is the convert. There are signs right now that markets are over extended but thinking long term it is consistent that all time highs will be reached. Hence I believe as a trader I will still focus on accumulating shares and view every dip is a potential buying opportunity.
None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!
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