On Tuesday, I mentioned that Wednesday evening's CPI is likely to be favorable and could pull the market up, similar to last Thursday's expectation for Friday's non-farm payrolls. I also posted about it on Twitter a day in advance and reminded that if one were to short on Wednesday morning, the position should be half the size of the short on Tuesday. A strong push followed by a decline typically does not last more than 72 hours; this is a hard rule. If you're going to short on the third day, the position should be small. Why small? The goal is to have enough space to add to your position in case of a rebound after a breakout, so that you have the opportunity to take profits around the Fed's interest rate meeting next week. Trading in the short term requires a bit of a bigger picture perspective and an understanding of the situation.
In a bull market, being bearish and not shorting, or at least trying not to short, is important. Every time there's a drop lasting a day or two, I hear many people lamenting that the bull market is over, that the bull has left, and predicting drops to 80,000 or 70,000. I can't even remember how many times I've debunked that. Just yesterday on Twitter, I saw several bloggers predicting a black swan event, suggesting the market could go to 5.19, etc. I'm at a loss for words.
For the next year, buying on dips should be your main focus; do not let shorting become your main strategy, otherwise a major bullish wave could completely bury you. 100,000 is the recent key level; if we can hold here, we'll see an increase to 50,000 or 50,000 points. Even if we enter a 3-5 day line and weekly adjustment cycle, the pullback space is only about 38% of the increase. For instance, on Tuesday, I mentioned Sol. Since the U.S. elections at 11.5, Sol has risen a total of 112 points (152-264), and as of now, it has pulled back 264-198 = 66 points. 66/112 = 58.9%. This is close to a 0.618 pullback (112*0.618 = 69 points), so shorts below 210 should not be considered; it is a low short in the short term. Therefore, I reminded several times on Monday and Tuesday not to short Sol below 210; by Wednesday at the latest, a strong rebound is expected.
