An investor has to be careful of stock market time bomb. S&P500 has to prove its recovery this week, breaking 2700 points will be a test of strength for US stock market. If this 2700 intermediate resistance could be broken, Asia stock market can only catch up next week after the Lunar New Year holidays.
A smart short-term investor who plans to buy low after recent 10% stock market correction, may integrate with trading strategies, waiting for uptrend market momentum and greed to come back. The recovery process may not be smooth after the recent market shock as some traders will be more cautious, not as “crazy” as before.
If the sell down last week is proven to be just a correction (stirring to cool down a pot of hot soup), then the next peak will be even more thrilling as it may potentially form double top or even Head & Shoulder pattern or Shooting Star, which can be risky in a high optimism global stock market.
In short, positioning in high optimism stock market has to be short term (following the trends closely) unless it is a truly defensive stock to resist the stock market time bomb.
When US 10 years bond yield is approaching or exceeding 3%, the Stock Market Time Bomb could be triggered by any potential black swan, the last straw which may break the camel’s back. Until then, enjoy the bumpy ride of crazy bull.
