Is everything “priced in?” Investors have gone “all in” with a disregard for caution. But with markets extended and overvalued what should investors do now?
As discussed in this past weekend’s newsletter, investors got even more speculative during the recent correction, which is the opposite of what you would expect. But if markets anticipate “good news,” then are there any “surprises” left?
In other words, if markets have priced in perfection, then there is not a lot of room for “disappointment.” Such was a point I made this morning on Twitter:
Lot's of room for a bigger #correction at some point with #shortinterest at multi-year lows. All you need is some unexpected, exogenous event to trigger algos to reverse course. pic.twitter.com/OOXEvaNvzj— Lance Roberts (@LanceRoberts) September 14, 2020
As we have discussed previously, “market momentum” is a hard thing to kill. Such is particularly the case when the “Fear Of Missing Out” overrides logic. In this past weekend’s missive, we laid out the case for a “sellable rally.” To wit:
“You can see the failure of the market at the 20-dma and the support at the 50-dma. What is essential are the upper and lower indicators.
Both of the upper indicators are currently registering short-term oversold conditions, suggestive of at least a reflexive bounce next week.
Conversely, both of the lower “sell signals” have been triggered, and as noted in the video, it suggests there is additional selling pressure on stocks currently.”...