Monday, November 8, 2010

Topping Process

Tops last longer than bottoms in the stock market.  Just when it feels like the market will never go down, that is when it becomes vulnerable to a pullback.  Right now, we have released all the positive catalysts that the markets wanted: Republican victory in the House, QE2 beating expectations of $500B with $600B, and an above consensus employment number.  Plus Obama agreeing to negotiate on tax cut extensions.  The market needs time to digest this good news and the process isn't done in 3 days.  But what is important is that the market has more two way trading, not up days and flat days with no down days.  When there is more two way trading, you are building a top which often leads to a sizeable pullback. 

I believe we will get more choppy this week and have more two way trading.  

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