Trend is still up. Enjoy the ride.

Black Swan rally?

"Everyone knows that the Emini needs a pullback after so many weeks up without one. The stops are far below. Bulls have big open profits. They have to reduce risk, and the easiest way is to take profits. That selling creates the pullback. Whenever anything is obvious, traders need to pay particular attention to the opposite.

When there is high probability one way, there is low probability the other way. Hence, everyone ignores the low probability direction. If the market begins to go in the low probability direction, traders are in denial. However, this results in bears trapped in as they sell new highs. Bulls don’t buy because they also think the rally will fail.

However, even a little rally can be enough to quickly make the bulls and bears worried. Both will begin to buy, and then buy in a panic. Hence, the low probability event can quickly turn into a rally that can continue up for a long time. Bears keep selling, picking tops, bulls keep scalping out. Yet, there is not enough selling to turn the market down. Bulls and bears therefore have to keep buying as the market goes up. Sometimes the buying is climactic. Other times it is a small pullback bull trend. If the Emini continues up above 2220, it might go up to 2400 before pulling back."