Hi Everyone
We’re right in the middle of earnings season and, surprisingly, the markets have held up rather well. In fact there have been a number of decent bull flags over the last few weeks that have converted to nice profits.
However, not for the first time, I would urge some caution and ask you not to get too carried away with feelings of optimism for a new bull market.
As Flag-Traders, we only ever trade what we see. Remember, we’re not in the business of predicting or forecasting, so for now if we’re seeing bull flags, then that’s what we have to focus on.
At the same time, as traders we do need to be on our toes and as we gain experience we also acquire a “feel” for the market. This is something that my most successful students refer to after watching our flags for a while.
So, what’s my “feel” for the market right now?
My guess is that we’re in a bear market rally which won’t last too much longer. At the very least, this market needs to test the March lows, which on the S&P 500 are now over 200 points away, and on the DOW,1,700 points away.
Remember the old saying “Sell in May and Go Away”. Well, that’s what I think will apply this time around, but we’ll need to see confirmation first. As Flag-Traders, we’re likely to see rounded tops and bull flag false breakouts as our first sign.
So, if you’re currently trading bull flags, be vigilant and make sure you take those first profit targets early, and if/when my instincts are proved right during the next few weeks then there’ll be some great opportunities to trade bear flags.
I’ll be back with more around the end of the earnings season.
All the best
Guy
