Be fearful when others are greedy

S&P 500 just broke a new high today after yesterday manage to stay above 2400 for the first time.

S&P 500 just break 2405 to 2410 where hit most traders stop loss and create extension. Currently market is looking on amount of supply to see whether the price increase will halt and retrace to 2400 to 2405 to retest again its support and demand, or the market just decide to run further upside.

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Currently margin debt is catching up and going to cross over S&P 500 as the picture show below,

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As we can see for the past 10 years, every-time margin debt and S&P 500 crossover, there will be a correction or even a crash, if we back-test 20 years time frame then we can see every crash is follow by a high point of margin debt.

Margin debt normally increase when the market is doing well as it attract people to leverage on margin debt to create extra return.

This is when bubble eventually happen.

This remind me of this quote,

Be fearful when others are greedy and greedy when others are fearful

As a technician, this make no sense as it didn’t give a concrete trading plan and literally how you can determine when market is greedy as high can go higher.

However, as a trader, I have this six sense that is time for me to be fearful. I won’t know whether the market will stop advancing and start a huge plunge or it will just rally to 2,500 or even 3,000 in coming years.

One thing i know is that, when you trade for long period of time, your sensing might be your powerful weapon.

There are a lot of assets class out there, I will choose to rebalance instead.

Currently those experience trader who follow the trend also will have a tight stop loss if they choose to jump into this bandwagon rally. Once price start to retrace, we should expect some volatility or bending of a trend.

Till then, stay safe and happy trading and investing.

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