The Rally That Won't Die

Well…I want to first say that my sell signal on the markets has since been reversed with Monday’s rally and I’m patiently awaiting the real signal. However, everyday the markets rally, fall, reverse, etc, rinse, repeat; the markets continue to paint a bullish picture. I’m not bullish, but given that the market doesn’t want to retrace any of this rally, common sense would tell you that the markets are displaying bullish behaviour. We’re sort of locked in a trading range for the last 3 weeks that I fully expect to be resolved very shortly to the downside.

I tend to think that anybody getting sucked into getting long right now is going to regret it very soon. Daytrading is the best course of action in my opinion at this time and trading gold stocks as they are very bullish. Not only are they moving higher, but it makes sense that they would be moving higher with the Fed’s approach to this whole crisis. The action of the U.S. Dollar is very telling.

When and if we move lower I expect it’s going to take the form of a huge one day drop (300+) on the Dow and people will find it hard to get short after that. Then the markets will continue to drop and before you know it we’re back down near the lows. That’s how the market tricks people. Notice the lack of people willing to short the markets these days. Before, everybody was shorting the markets and now there’s barely anybody on Twitter or the blogosphere that want to trade the dark side. I’ve said before that when one trade starts to get crowded, watch out.

NYMO close to moving back in the negative.

Who would have thought the Vix under 30?

If this rally is going to continue, we really have to see this indicator move into positive territory. Flat-lining just isn’t going to cut it and you can see that in the spinning of the wheels in the markets.

Related Stocks: DOW

Comments

[AlphaZedder:]

Wow ... what do all those pretty pictures mean?

May 21 05:53 AM

[MKW:]

Buyer exhaustion should have set in a few weeks ago, but my bet is that this market is going to be a bit more insidious than you think. My bet is that the market finally drops - starting with a day down 300ish like you said - and then takes a retracement to one of the standard Fibbonacci levels. After that, it'll come back up, probably just as violently, sucker still more people in because they'll take that as confirmation of the new bull, maybe go as high as S&P 1000, THEN it'll crash to test the lows/break to new lows. I suggest this because it's the most insidious thing I could think of the market to do, and the way it's been behaving lately, expecting the worst is the best course of action.

May 21 06:57 AM

[Silock:]

Why even bother being in the market at all if that's your outlook?


On May 21 06:57 AM MKW wrote:

> Buyer exhaustion should have set in a few weeks ago, but my bet is
> that this market is going to be a bit more insidious than you think.
> My bet is that the market finally drops - starting with a day down
> 300ish like you said - and then takes a retracement to one of the
> standard Fibbonacci levels. After that, it'll come back up, probably
> just as violently, sucker still more people in because they'll take
> that as confirmation of the new bull, maybe go as high as S&P
> 1000, THEN it'll crash to test the lows/break to new lows. I suggest
> this because it's the most insidious thing I could think of the market
> to do, and the way it's been behaving lately, expecting the worst
> is the best course of action.

May 21 07:47 AM

[xxxx:]

YOu can't predict a manipulated market.

May 21 08:19 AM

[Prudent Man...:]

It will exhaust itself and what will it do when it understands that the market crisis may be over but not the recession isn't and won't be for a long time? Where will the growth come from and what is going to do be done with our excess capacity - land, labor and capital? Maybe Americans will take those jobs that government states they won't. As I know from personal experience, hunger is an incentive to do whatever you can to eat. Do we need more intensive hunger to wake up? Food, clothing and shelter is not an entitlement, e.g., Africa.

Then, after the recession what? Of over twenty alerts I received early yesterday morning everyone of them had to do with communications services or products of some sort. Like the BHO Administration, are we going to talk ourselves out of this economic malaise?

What do we make besides conversation? Time to roll up our sleeves, get rid or the European entitlement philosophy and become competitive, which means a lower standard of living with less wasteful goods and services. We and future generations will be better off. More is not always good.

May 21 08:25 AM

[Moon Kil Woong:]

Fundamentally, we must see if a spike in bond rates, commodities rise, dollar collapse, and inflation is setting the stage for a new train wreck. If so, you can kiss charting goodbye. Fundamentals will take control of the wheel.

If not, look for still more money flows into the market from fleeing bond investors avoiding the Paulson/Bernake great Zirp Treasury Bond bubble. The author is right in seeing the efeects of this in the charts, you can see these flows into the market from a mile away.

May 21 08:30 AM

[MKW:]

Yep... that's the question all right.


On May 21 07:47 AM Silock wrote:

> Why even bother being in the market at all if that's your outlook?
>

May 21 09:06 AM

[metricon:]

Yes you can, If by manipulated you mean a market fed by the Fed's printing presses and the taxpayer's coffer. If that is what you mean, then by all means the markets will continue to rally as long as long term interest rates are kept down by QA. The looting of the tax payer has barely just begun, and alot of fresh money is being minted by the day. Alot of that money has got to go somewhere, where better than the equities market. Same stuff is being done in China.


On May 21 08:19 AM xxxx wrote:

> YOu can't predict a manipulated market.

May 21 09:06 AM

[TA:]

To repeat a comment made a while ago, 'Are you ever right?'

May 21 11:26 AM

[AndrewBaker:]

What can any sensible person do when there is so much bad financial stuff out there but the banks keep going up? I'm staying with my unleveraged short S&P 500 and unleveraged financial ETF, buying stocks on dips and selling into rallies, day-trading the 3x financial ETF and few-day trading the 2x similar, plus trying some commodity ETF, long and short, hoping for a trend that will stick and taking small profits whilst finding one.

The markets may not be sensible at the moment, but they're sure not dull.

May 21 12:12 PM

[Bjarne Jensen:]

What happened to Chetin?

May 21 05:23 PM

[jgbooker:]

He may have been banned.


On May 21 05:23 PM Bjarne Jensen wrote:

> What happened to Chetin?

May 22 07:39 PM