Are we entering a pullback?
And is the market peaking – do stocks really have room to go up much further?
As I said yesterday, it’s still too early to tell whether we’re entering a pullback or not.
But, as for whether the market still has room to go up – the answer is absolutely yes.
And today’s chart helps show why.
Chart of the Day
That’s a table showing over $6 trillion in cash still sitting on the sidelines – what we call “dry powder”…
Because it’s the fuel for the next big leg up.
When the pullback inevitably occurs, we may see even more cash flow into the sidelines.
That’s fine…
Because when the rally resumes after, this is the cash that will keep it going.
But as I said – you don’t want to wait for this money to start flowing back into the market…
Because that means you’ll miss all the opportunities out there right now.
Insight of the Day
Sitting out a market rally – even if it is getting overextended – carries heavy opportunity costs.
As a trader, you want to participate in as many rallies as possible – even if these rallies are overextended.
Because the market rarely does what it “should” do – at least not on schedule…
And if you’re waiting for a pullback, you’ll miss out on the gains to be had right now.
Sure, you have to be a bit more careful in an overextended rally – such as by using tighter stop losses and more frequent profit taking.
But sitting out completely carries heavy opportunity costs, because the bulk of your gains as a trader will always be made in rallies just like this one.
So the issue isn’t whether you should participate in this rally – but how you’re going to do it.
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