Saturday, February 10, 2018

Saturday Rock Blog: This Bull Market Drives Me Crazy

Its been a while since I've posted, and as you can probably guess.. my bets paid off big time. The market did pretty much what I have been posting about for the past couple of years. Almost every target was met, and I was mostly good about taking profits. The most recent sell off caught me, like most, but I see it as a healthy correction. Honestly, I was pleased by how quickly it happened and now appears to be in the rear view mirror. This looks like a textbook simple ABC correction.
I do think that the best/biggest moves up in the markets are yet to come. Violent corrections like the one we just saw have a tendency to clean up the market (by washing out over-leverged longs, rope in perma bears, VIX sellers, etc) better than slow and steady market corrections. Everything I look for in a market correction is right there in the charts. We pulled back to the 50 dma's, tested, failed it (fine), and then very rapidly pulled back to the 200 dma's. Almost every major index pulled back ~10% after years without a >5% correction (great). This is how I see things playing out with IWM: rapid push to the highs, followed by a pullback to the 50 dma, then rip to new highs.
The IWM indicators are showing more bullish divergences than SPY or QQQ, and I do think IWM's time in the sun is coming. It has under-performed but that should change given the economic fundamentals. The candles look great, the volume and other indicators look bullish. I think the days of +0.5% up are over, and we are entering the crazy town phase of the bull market where stocks go up >1-2% on up days. Buckle up... This party is just getting started, don't miss the best part. Capitation (hardcore melt-up upside) is coming, and it will be surprise everyone to the upside.

Disclosure: I own IWM, SPY, and QQQ calls.
Assuming we do see new highs, my 2018 targets will then be: IWM: $176 (probably underestimated), SPY: $321, QQQ: $190

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