The morning commentary from Twitter and blog traders has identical sentiment from bulls and bears alike: this is a relief rally and may last a few days but will eventually run out of steam. This sentiment is echoed by some of the more noble people I read. Actually, it’s echoed by too many traders.
I see the following two scenarios most likely as we enter Monday afternoon:
All short-timeframe traders will begin front running each other and we’ll have a weak close
or
We close firm, with markets closing above their midpoint on the day
I’ll use today’s close as a hand tip, and my expectation is we see one of these scenarios play out, listed respectively to the above outcomes:
A Weak close leads to weakness throughout the short week, and then we go higher
or
We go mildly higher this week, than much higher the week after
I know and accept that markets rarely give such binary outcomes and I keep an open mind to the possibility of a sharp clawed bear market. Many trader’s favorite charts are broken. However, I currently hold a portfolio of strong charts, and they look ready for another leg higher. Have a look:
