I don't know what other traders are thinking, but let me put in an educated guess. For those that looked at the last 2 days, their first flashback will be to Wednesday, February 3. That is when we were last trading at these levels. The similarities don't stop there. The market on Tuesday, February 2 was a strong upday. So was Tuesday, February 16. The market is short term overbought now. It was short term overbought on February 3. The market traded in a fairly tight range, closing near 1100.
This is where the similarities end. The investor sentiment was more positive back then, the Greece worries were yet to be headline news, and many traders were thinking that we were going to go right back up like those dips in 2009.
What are the warning signs that this time is different than 2 weeks ago? This time around, traders are more cautious, yet the price is higher! That is warning sign #1. Warning sign #2 is the stock market and crude oil ignoring serious euro weakness to add to yesterday's big gains. Warning sign #3 is the low volume rally. Contrary to what the public believes, low volume rallies in this environment of low demand and low supply are more sustainable than high volume rallies.
The market trades like the weak eager sellers already sold last week. The buyers are coming back slowly with the Greece headlines fading away with no eager sellers willing to sell to them. Thus the low volume and higher prices.
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3 comments:
In looking at the Hang Seng, DAX, and SPY charts, I have the opinion conditions look good for a worldwide selloff. Selloffs and rallies tend to be done in sync by world markets. I was going to go long today, but decided not to. Good luck everyone!
One guy from the Scottrade Community Forum pointed out that this looks like an inverted head & shoulders in the making, on the DOW or SPX.
The inverted left shoulder & head looks best, viewed on an OHLC chart.
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