This week will be filled with earnings from various companies which should help markets decide which way to go. Will earnings exceed, meet, or disappoint expectations and will economic reports surprise or disappoint?
All major indices printed bullish hammer candles on Friday, which in technical analysis is pretty bullish. On Friday morning, markets looked like they were going to get smacked again but near the end of the day, the markets rallied and close either flat or positive. That tells us that either shorts are covering their positions and downside momentum is slowing or bulls are stepping in again to buy this 6-7% retracement we've had. Its hard to predict what kind of action we may get this week as we may see continued momentum from the bulls Monday on this bounce. All I know is there is a serious battle going on and sometimes its just best to wait to see what transpires.
The major trend has been up since March but the major trendline has been broken and selling has been more aggressive than previous retracements. This scares me a bit as all trends are meant to be broken and as slow as major trends develop and continue, they crash even faster when the party is over. Normally in my trading before, I have tried to aggressively short these countertrend dips but I didn't on this last one. Instead I think it would be better to sell at the top of ranges and sit in cash ready to buy on the dip than to try to short and time every counter-trend move. You don't want to be going against the major market trend and when that is up, you only want to be long or neutral. However looking back now, if at first sign I sensed weakness in this market and shorted aggressively, it would have paid handsomely. Looking back to Jan 21, 2010, the market printed a large breakdown in the market after rising in a wedge. That day would have been a great point to go short and ride this market down for 6-7%.
So whats in store this week? I think we may see a small bounce or some neutral range trading and then we are on our way down again. I think the major trend has been broken and the gains we had last year has priced in everything fundamental about this market. Some people would even say this market is priced for perfection, meaning that any small slip up from big large bellweathers or economic reports will cause this market to crash again.
All major indices printed bullish hammer candles on Friday, which in technical analysis is pretty bullish. On Friday morning, markets looked like they were going to get smacked again but near the end of the day, the markets rallied and close either flat or positive. That tells us that either shorts are covering their positions and downside momentum is slowing or bulls are stepping in again to buy this 6-7% retracement we've had. Its hard to predict what kind of action we may get this week as we may see continued momentum from the bulls Monday on this bounce. All I know is there is a serious battle going on and sometimes its just best to wait to see what transpires.
The major trend has been up since March but the major trendline has been broken and selling has been more aggressive than previous retracements. This scares me a bit as all trends are meant to be broken and as slow as major trends develop and continue, they crash even faster when the party is over. Normally in my trading before, I have tried to aggressively short these countertrend dips but I didn't on this last one. Instead I think it would be better to sell at the top of ranges and sit in cash ready to buy on the dip than to try to short and time every counter-trend move. You don't want to be going against the major market trend and when that is up, you only want to be long or neutral. However looking back now, if at first sign I sensed weakness in this market and shorted aggressively, it would have paid handsomely. Looking back to Jan 21, 2010, the market printed a large breakdown in the market after rising in a wedge. That day would have been a great point to go short and ride this market down for 6-7%.
So whats in store this week? I think we may see a small bounce or some neutral range trading and then we are on our way down again. I think the major trend has been broken and the gains we had last year has priced in everything fundamental about this market. Some people would even say this market is priced for perfection, meaning that any small slip up from big large bellweathers or economic reports will cause this market to crash again.
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