About a month ago, I wrote this post entitled, “One Man’s Bear Flag is Another’s V’,” where I discussed the idea that during a cyclical bull market, we are bound to see countless bearish setups fail and trap eager shorts. Every so often, though, the bulls end up trapping themselves by anticipating the failed bearish patterns, and instead of squeezing those ursine folk, they find themselves at the bottom of the blender with the setting on “Bull Ice Crusher.” Woodshedder also recently discussed this concept as applied to the 20 day moving average crossing under the 50 day. The April 2010 and subsequent several months of price action last summer pretty much exemplifies a situation where the bulls got “too cute” with the thesis of buying bearish setups as a contrarian technical play.
In the current market, we have arrived at another one of those Rubik’s Cube type of decisions, where we have to simultaneously solve the puzzle without overthinking things. The daily charts of the SPY QQQ (renamed from QQQQ) and IWM, the ETFs for the three most significant indices, are all showing fairly obvious bearish setups of a heavy volume sell-off, followed by a low volume relief ounce up to retrace the breakdown point. This should be the classic short setup for the market to rollover. I am not betting on it yet, and the benign price action of yesterday and this morning is hardly indicative of the market rolling over.
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Nice. Thanks.
Cheers
Thanks Chess….’better late to the party than too soon”
Cheers +2
Thanks.
Cheers +3
Good stuff.
I wouldn’t be surprised to see this chop up some bulls and bears and morph into a bigger triangle or wedge before making a move. Feels like the market needs time to chew on everything that has happened lately.
good points
Chess
FCX is up big ..sign of +ve things to come?
See my video market recap today.