After perusingÂ the Investor’s Business Daily weekend edition, I am bewildered by the number of IBD 100 stocks that appear ready to make new highs. It was then I realized why slaughter yards use a series of sluices and gates to lead the naive beasts to their demise. The system allows the animals to beÂ led easily to their deaths, keeping them calm and completely unaware of what is going to happen.
How many bulls are blindly following other bulls, straight to the house of pain?
You see, this oversold rally has unfolded just like every one that has come before it. For four days we’ve have bulls getting inÂ line behind the other bulls, blindly following each other into the trap. Yes, that clanking of metal and chains was the gate being locked and shut behind you.
What? You say you did not notice volume decline as the price rose? Huh? You did not notice the Nasdaq reversal on greater volume than Wednesday’s big gain? What about the failures, across the indices, at previous resistances and a major moving average?
Sure, dismiss technical analysis as hocus pocus. Ignore the lines. Then ask yourself how often you develop habits. Then consider how often the people around you exhibit the same routines, day after day, month after month, year after year. As the market is a proxy for human beliefs and behavior, what habits and routines are in play at this junction?
The following is a handy dandy list of economic data to be released next week. There are some significant reports due, so bears and bulls alike should be braced for more volatility.