Bubble Goes Pop! Approaching the brink pt 2

Approaching the Brink pt. 2 - Bubble Goes Pop!

First, if you haven’t already read pt.1 which gives you more background on my opinion of the U.S. stock market.

The market moves in cycles, but how do you know which phase you are in? Are you in a liquidation phase, continuous bullish trend, seasonal run, or was there a change in economics that caused specialized businesses to thrive?

Below are some example charts of various cycles that may help make these concepts easier to understand.

Characteristics 

As I characterize this current market, I see no fear from bulls buying the dip, which means there is plenty of comfortability. The duration for a stock to make up a 15-20 point drop is about two days, give or take. The bear killer could have occurred last week with a close above 4630s weekly, but it did not.

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I will look for two main scenarios as we head toward the end of big tech earnings.

1. A new bull market has emerged if 4200s are saved.

In part 1 of this series, I talked about the amount of failed breakouts before we had a successful break to the upside. I don't think it will be an easy path, but I would be surprised if we see our line of resistance at 4650 get taken out. The last time I was bearish on $spy was back at 4300, and now we are 300 or so points higher.

My long-term members know I am never delusional. If a conviction is being proven wrong, I do not allow myself to go hundreds of points in the opposite direction.

2. The market searches for true value, and become volatile with a few upside fakeouts but ultimately allows the market to reset and rebalance.

If we bounce and test 4380-4400 after 4280s, I think that could be a great profit-taking area for most, as I wouldn’t expect such a critical level to break on its first try. My conviction to see downside in the month of August can be invalidated if we start having weekly closes above 4700. I’m in no rush to be short full size. If we break the 4400s, we could have a long way down, so regardless, money will be made.

Play of the week

$ALGN - alerted in premium chat. Bought for 7.25 and sold for 26.00. For those not used to decimal points, we took $725 to $2,600

The loser of the week

$MSFT - we had great success with this stock two weeks ago and decided to hold on to the runners. Some of these runners went to zero, which is okay as we took enough profit off the top to be a winning trade still. Lesser of a winning trade, but still winning.

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To Conclude

Remember that numerous factors and market cycles influence the stock market. Therefore, it's essential to approach market analysis with a well-rounded and cautious mindset.