Markets move in cycles. First comes optimism, then euphoria, then the fall.
Right now, it feels like we may be in the denial stage of a short cycle.
Prices have started to weaken, but many bulls still believe the rally will continue. People say things like “this is just a dip” or “the market will bounce back soon.”
That is exactly how the denial phase looks.
The big question is simple:
Are we still in a bull market… or are bulls just in denial? Or this is a bear trap?
Challenging time and price DD within bull market. There were pockets of euphoria, esp in small caps. But i dont think we have a 2007 or 2000 like bull market where people just keep chasing the market.
We don’t have AI/Tech rally here. That is one place where perhaps we may have some sort of bubble, but its hard to say if and when it will burst and how badly we get affected since we are not in that rally.
That said, any bad event can trigger challenging times. We dont need to have a buying climax always. I think pre covid we were range bound. So perhaps we get something similar again, who knows.
Don’t you think the move from the election low (~21,700) to ~26,300 itself looked like a buying climax?
No not even close. In bubbly climactic markets, there is almost a compulsion to invest or you will ‘miss’ returns. I think we had some of that in smaller caps.
And an expansion in levearge/loans perhaps bad loans etc. Those things can hurt.
Small extensions and reversals are part of normal markets. I wouldnt call last few years as climactic.
That said, this down move is very fast. In spite of initial buying on dips. Momentum begets momentum. So it can setup another move even after it pauses a bit. But right now it just keeps going. This is the fastest fall since covid but its early days.
Some reading ? This was written in 2013, so not commenting on today’s markets.
