Stock Market Volatility On The Rise?

V-readings are incredibly high, and market participants are no longer as bearish as they were a few weeks ago. One of the characteristics of higher V readings is that they can widen the trading ranges. In simple words, it widens overbought and oversold ranges. For example, before the surge, Dow 30K would have been considered extremely overbought, but with the move up, the extremely overbought zone would start in the 30,600 ranges.

There is nothing that states this market has to pull back firmly. However, complacency levels are rising, and whenever the masses start to throw caution to the wind, the market either pulls back sharply or asset classes they were chasing experience healthy corrections. We also need to remember that this is the market of disorder, and this means that anything can happen.

So, what should one do in such a market? Nothing has changed, it’s always prudent to take some money off the table, when bullish sentiment surges and when the markets are moving towards the overbought ranges. What happens if the stock market does not correct? Who cares? In the event, nothing happens, we continue doing what we always did. We don’t change our trading strategy based on whims and what-if scenarios. Portfolio management is key to long-term success. If the markets don’t pull back, we will continue looking for stocks that offer the best risk to reward ratio. Nothing changes, fear, euphoria, doubt are all perceptions, and the foundations for these perceptions are illusory at best.

Don’t fret if the markets don’t pull back firmly, for no one has ever gone bankrupt banking profits. There is always another opportunity in the making. Banking stocks, airline stocks, and stocks in several other sectors are either trading in the extreme to insanely oversold ranges or a close to hitting these zones. However, if the markets do experience a sharp correction, don’t hesitate to deploy your dry gunpowder. Nervous nellies are fond of stating it's different this time, well it never is for they always make the same blunder, and to justify their stupidity they have to formulate some pathetic excuse. If you want to ensure it's different this time, then do something different. If the trend is positive and the market’s pullback then embrace the correction with a bear hug, now that is doing something different, everything else falls under the category of hogwash, rubbish, or hot air.

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