The golden rule about fundamentals is they are interpreted according to the trend. When everything is bearish, good news is interpreted as “not good enough” and when the trend is bullish, bearish news is always ignored. It is not the news, it is always, and without exception, the sentiment that counts.

The next Golden Rule is the majority MUST always be wrong. This is the actual mechanism that drives the market trends. When the majority are caught on one side, panic strikes for they have to shift direction and there are few on the opposite side to absorb the trade. Thus, like Japan, everyone was long the Nikkei. The market could not rally for 23 years because the weak longs were always there to sell rallies. Flash crashes take place because everyone who is LONG tries to sell and there is no bid. It is not shorts.

Consequently, shaking the weak longs out of the trees is healthy for a market for it is renewing the future buying capacity and removing those who will be selling rallies.