Posted by: DoubleTake Date: Saturday, April 18, 2009 1:51:12 PM In reply to: mtcinc0 who wrote msg# 37838 Post # of 37840 [Send a link via email] mtcinc0. ;) Been meditating on the week's action this morning. Here's what I'm seeing.
* Investors who bought from below the 50-day ma have no incentive to sell. They hold a winning hand unless the market signals that it clearly intends to violate the 50-day ma. Unless there is really bad news, any selloff will run out of steam by the time it gets to the 50-day. Therefore, the probabilities highly favor investors who do not sell.
* I believe investors know this and this has been driving the action for the last week. They are simply not selling in sufficient numbers to create any downward momentum. But traders are shorting like crazy, getting trapped, and covering repeatedly. Every time this happens, the bears reward investors who do not sell.
* Therefore, unless there is really bad news, any selloff from here is likely to be more shallow than you would normally expect. Bears will soon see the trap and start the competition to get out. Traders and wannabe bulls will see the shallow turn and will compete to get in and will make the 2.5-week cycle come in a day sooner than usual and one level higher than expected.
* Bullish traders (as opposed to investors) have quietly moved back to cash, perhaps taken small bear positions, and are waiting with a cache of dry powder to load in at the bottom of the shallow turn.
* This has been the dominant game for a while and is likely to continue.
Just what I'm seeing today. Any major rise in world tensions or any significant economic news could of course completely change market direction. I don't want to dwell in the land of wish and hope. I want to see the market exactly as it is right now.
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