By Jaimini Desai
The past week saw us whip around in a wide range between 4,250 and 4,450. Due to the selling, the market did reach extremes in bearish sentiment and oversold technical readings that have reliably predicted good buying opportunities throughout this bull market.
While, I had my doubts that it would be just as simple this time, the market has clearly broken higher from last week’s range on strong volume.
I do believe there are some positive developments under the surface. We saw gains across the board rather than gains that were concentrated in a handful of stocks and sectors which was the case last week.
We also saw the type of “relentless buying” that marks important inflection points in the market and can be powerful enough to cause a change in trend.
However, I don’t think this means that we should throw caution out of the window. At times over the past few months, we’ve switched from an aggressive posture to a more defensive one.
Given these developments, it’s appropriate to switch to a more neutral stance, loosen our risk controls, and reduce our focus on risk and the downside of our holdings.
Bull or Bear?
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