As this consolidation after one of the largest two day advances in the Nasdaq of the past two decades wears on, you can see how quickly short-term bulls are turning into long-term bears, as the market takes its time to digest the recent gains, with the S&P eyeing 4200 in the near-term.
A simple pause in the uptrend has turned into every reason to worry about the current state of the market.
Crypto pain has turned into systemic risk.
Inflation worry has turned into not knowing when or how the Fed will ever pause.
Earnings concern has turned into immediate recessionary worry.
Every fear factor that the market is dealing with is being amplified exponentially due to the bearish psychosis that has enveloped investors for much of 2022.
There isn't an investor out there who doesn't view the current market environment as an indecisive game of bingo, with little confidence about where we are headed in the near, intermediate or long-term.
This is where opportunities are created.
The indecision creates a fog that further inhibits players from processing information appropriately. This is bolstered all the more by a constant barrage of noise in the form of seemingly relevant fundamental data that is predominately bearish in nature.
In such an environment there are zero avenues towards digesting fundamental information in a manner that is productive.
The reality of the situation is that with every Fed hiking cycle comes two markets: A down market and an up market. There hasn't been a prolonged rate hike cycle that saw the markets move along a linear path that was predicted by the vast majority of investors.
Yet in the current market, there is a large contingent of amateurish investors who believe the Fed is the be all and end all of the markets.
The vast majority of investors believe they can simply wait around, twiddling their sausage fingers, waiting for the Fed to pause and VOILA! you buy and make a small fortune.
Investors are about to get a wake up call as the markets front run the Fed pausing by leaps and bounds above what anyone thinks is possible.
The market is simply going to runaway from short-sellers, bears and those in cash, which constitutes a significant percentage of the current investor population. In running away from these investors, the markets force a decision. In other words, it's the pain trade.
The current pain trade, however, is not simply a contrarian's wet dream. It is bolstered by everything from seasonality, the long history of Fed hike cycles and technical considerations that have created a rare opportunity to capitalize on what can only be classified as blatant ignorance.
So here we are.
They are so quick to abandon ship, without knowing where, how and why the ship is going where it is going.
Goodnight.
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