With the ES sitting at all time highs and volume sitting at a two week low, its time to consider what could happen next. With the past 12 to 13 months traders have been faced with numerous challenges, from Covid-19 shutting down many if not all of the worlds major economies to trillions of dollars injected into the markets by the FED.
Add on top of that an election year that brings in new policies and views, traders have had their hands full for quite awhile now. Markets could easily make a change for the worse and traders will have to adapt to an entirely new market. Now we aren't saying that there is going to be a major bear market and that sky is going to fall.
What we are saying is, one of these days things are going to change. It could be next week or a few months from now but how long can markets continue to move in this direction? That's the trillion dollar question that we hope to inch a little bit closer to in this blog.
For the past year traders have simply been able to blindly buy and would have most likely walked away with a decent gain. With a HUGE influx of retail traders we have see once in a life time events such as GME and AMC gobble up many retail traders and spit them out. This could be due to numerous different factors that wont be covered in this blog, but what traders do need to see is once these "paper hands" see a down turn are we going to see a huge sell off due to retail traders liquidating positions.
If you have turned on any finance related news broadcast in the last 3 months you would have seen millions of new traders blindly buying and sell meme stocks, with some walking away with millions and others losing everything. Is this behavior going to add to the next sell off? Our bet is yes, due to the fact many of these traders only think "stonks" go up.
With 48% of the American population participating in this new craze in one way or the other, the next sell off could be massive.
A simple look at a monthly chart of the ES( see video below) you can tell price is getting over extended and there has yet to be any real pull back. Now this could go on for the next 1-10+ years, our bet is when the FED pulls back so will the markets. This is due to the fact that everyone now knows the FED will come and save the day if anything was to go wrong.
With the parabolic move we have seen on the ES and other markets this past year, eventually we will need to see some sort of reset.
Since we are not in the business of predicting the future we wont be giving an exact date or time when this could happen due to the fact it would most likely be wrong, only that you need to know eventually stonks do go down (for a period of time).
The goal of this blog was to make sure traders don't become blind by the last years movement and continue to blindly buy.
See the video below for further explanation.