As The Market Pulls Back: Should We Panic?


The Market is definitely tired after an epic run recovering from the Coronavirus Pandemic in March 2020. Lately, I noticed my watch list, getting smaller and smaller, usually, when that happens the market tends to pull back. The type of stocks I follow are market leaders, and when they stop leading, the market ends up pulling back. Six days ago, I tweeted about the market putting in a top and getting much harder to make money:

Since then the Market has slowly bled, and stock rotation has occurred.  Now the question is, should we be buying this pullback? Before I answer that, I just want to clarify that the pullback occurring right now is perfectly natural, as stocks don't go up in a straight line forever. Stocks tend to pullback after strong up moves and digest gains then move back up again (as described by Elliot Wave Theory). One reason why Market has topped out a bit is, its number #1 leader Tesla ($TSLA), has tired out and dragged everyone else down. Take a look at the Nasdaq chart above ($QQQ ETF), I'm using the Elder Pulse system, along with Bollinger bands. You can see, the Elder Pulse system has shown price to enter "bear mode", it's good to see other examples in the chart as to what happens when price enter's bear mode.

The question is, should this dip be bought? The answer is yes, but timing is key. Keep in mind the Fed drives the market, and really won't allow the stock market to be in bearish mode forever, so throw away fundamentals, as they don't apply. This is simply a hype-driven market, where every investor and trader wants to find the next Tesla ($TSLA). As for now, I need to see how this market plays out as it pulls back before I decide to start adding to positions. I would be cautious with the current market environment, don't panic, as the market will eventually bounce back (hard to say about individual stocks though). I will likely live tweet or post on this blog what I plan to do, and what stocks I decide to buy. Stay tuned!

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