This post from Oct 2013 focuses on the S&P bull run and looks at what happens when there's no technicals to rely on (the market is at an all time high)
I was thinking to myself over the weekend about the situation in stocks. A huge part of trading is technical analysis and it’s general ability to become a self fulfilling prophecy. If everyone is trading off the same levels then it adds depth and definition to the market.
Take stock markets at all time highs, what if there is no tech?
How do all the tech heads trade against a trend or find levels to enter into the market, except in one direction only? With history, technicals provide points to trade both ways in a market but for stocks, they’re in uncharted territory so there’s nothing to the upside to lean against. Given the average trader’s often overwhelming mental reaction to try to pick tops and bottoms how do you trade against thin air.
Does the lack of upside technical resistance mean that traders are in fact only trading one way, i.e up, meaning that the the market becomes overly supported due to the lack of technical sellers, and that the only available technical analysis is for support level buying? Is this why we’re seeing the virtual straight line up in stocks rather than the QE trade?
Do these situations force religious technical traders to focus on fundamentals for two way direction?
It must be a sell now right?….right?….somebody?
