Friday’s rally on the back of the two-day selling event earlier this week raises a familiar, albeit entangled, setup for those who have been involved with the market since March 2009. On the one hand, a reflexive low-volume bounce off the high volume selling/distribution we saw *should* be sold into, respecting the distinct possibility of a much-needed and overdo correction about to deepen.
However, as we have seen countless times over the past few years, one man’s bear flag is another man’s V-shaped rally to fresh highs. I used that phrase as the title of a blog post two years ago in late-February, when the market was facing a similar setup. Make no mistake, a low volume rally to fresh highs is on the table and must be respected. But so, too, is the notion that the plentiful V-shaped rallies off apparent bear flags over the past few years has molded many a trader into the complacent mindset that every sell-off will immediately snap back. As you might imagine, that mindset will eventually be punished and punished badly by Mr. Market.
In the meantime, I will cover all of the relevant issues this market presents, with specific ideas and focused analysis in my Weekly Strategy Session this weekend.
See you there.
Great points as usual Chess. My smart ass comment in last post was more about market dynamics. We both know low volume runs higher are as you noted the norm, not the exception. Price pays as they say. Just hope for low volume LOL
Oh I completely agree. Was not referring to your comment. Have a great weekend!