How Obvious is Too Obvious?

The high beta small cap stocks in the Russell 2000 Index are gapping up to their 50-day moving average this morning.

As you can see below on the daily timeframe, the 50-day is still declining, and today’s gap up after a short-term V-shaped rally may signal exhaustion in the interim.

Of course, if everyone is thinking just that, then the market is likely to deceive and push higher. For those reasons, I am sticking to my plan of being methodical in portfolio allocation and position sizing with this rally. Quickly cutting losers, while playing along with the rally on the long side makes sense–I am just doing so aware that the vast array of declining 50-day moving averages is capable of causing short-term turbulence seemingly out of nowhere.

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