Breakouts can occur at extremes in the complacency indexes. Reversals don't always occur. So don't get complacent about anything, especially not the complacency indexes.
As Monty has pointed out, the NYSE McClellan summation indexes suggest the possibility of a breakout. The Naz ones haven't given buy signals yet, though.
So, as usual, I think the market could go up or down from here, presciently enough. The complacency indexes could linger at extreme overbought levels during a breakout, or they could plunge.
So use stops, protect capital, never trust your hunches, convictions, predictions, etc. Place your bets, if you must, and if the market moves against your trades, quickly accept your losses and move on. Don't stick around to watch a small loss turn into a bad loss, and a bad loss turn into a horrendous loss.
If you think it's more likely that the market will move one way or the other, think again. No matter what you think, or what your system tests and studies show, the market will take its own direction -- even if your system has been 100 percent accurate in the past. And if you don't believe that, it'll take your money, too. |
