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My glasses almost fell off my face Monday night when I read this headline from Bloomberg…
"ETF Investors Are All-In on Stimulus with $17 Billion Stock Bet"…
That's right. Investors have pumped more than $16.5 billion into stock exchange-traded funds in just seven trading days in April.
The article stated that the "torrid" pace put inflows on track to exceed December's monthly inflow total of $42.5 billion.
Talk about a crowded trade…
What's happening right now is a toxic combination of analysts saying, "The bottom's been put in!" and also, "Buy the dips!"
Yes, you can start to buy in. Slowly. Use dollar-cost averaging and buy in increments.
But going all in… well, there's a reason the great Wayne Gretzky said to skate to where the puck is going, not where it has been…
That's exactly why the last time I saw this happening, in December, I bought puts. And they paid off heavily in January and February, such as my 47.87% January gain on FedEx Corp. (NYSE: FDX) and my 108.57% February gain on Tilray Inc. (NASDAQ: TLRY).
This type of long bet – with people throwing money into the market with coal shovels because it's been climbing for a few weeks- tells me one thing: We're still in the first stage of the market pullback.
About the Author
Chris Johnson is a quant - he's obsessed with building and perfecting mathematical models that allow him to predict, with startling accuracy, the direction of the markets, entire sectors, and individual securities. For the last year, he's been researching and building a new system that lets him move swiftly in and out of the hottest stocks in the market for life-changing gains - entirely on his own terms. The results of his newly-minted Night Trader system are nothing short of amazing.
Chris also contributes to Money Morning as the Quant Analysis Specialist.