It’s happening again

I’ll use the words “many” and no one” loosely, generally and for effect.

Many don’t think asset prices which have doubled or trebled in the past 6-10 months can ever mean revert, let alone fall.

Even if the price action resemble parabolas, are trading at historic stretch above their moving averages, in many cases at 2.5 or more standard deviations above their mean or are registering Overbought readings for the first time in 3 or 4 years……

it seems many are trying to squeeze the last 10% out of a ‘crowded’ trade and can’t seem to notice that the herd had already arrived.

Markets and prices factor in and discount future events and occurrences which is evident in the price of copper (as a result of the supply shortage & electrification theme) and semiconductor company share prices (see the SOX Index below)….

but once the ‘chip shortage’ story enters the popular vernacular, it’s time to be careful doing the wrong thing at the peak of the pendulum’s arc.

These prices are already been rising months and months before hand.

Incidentally, the SOX Index has already declined 14% over the past 6 weeks (from its April 1st high).

I implore that ‘many’ tune into the business of probability and mathematics.

Caveat emptor !

May 13, 2021
by Rob Zdravevski
rob@karriasset.com.au