How do we know it is a bear rally? Easy. Volume. Volume would not be heavy on the selloffs and light on the rebounds like it has been if this was real institutional investors. Besides that I ask you, if you were a bank or a mutual fund, would you be buying stocks knowing what kind of macro environment we are coming upon? I would think not.
The biggest surprise to Friday’s trading is the complete reversal of action from Thursday. After Thursday ran right into the 50 and 200 DMA resistance points on various indexes, it sure seemed like the trend was ready to push lower. But just when the market looks like it wants to breakdown, it breaks upwards. That is what markets due in bear markets. They do this to throw the shorts off. They make the longs and bears look bad until eventually both give up (like I have done a while ago). This is the right thing for the market to do. But the problem belongs with traders. Most will get frustrated and leave the game behind. The smart traders watch this up and down dance and wait for the big volume of the institutions to return. My bet is that when they do return they will return as sellers.
If you don’t think I have a list of stocks I want to get short that I was not able to get short or make big profits of from November to January, you are wrong. I am loaded with names of ag, oil, big-cap tech, and other gold/metal/mining related stocks that have been in bull markets anywhere from 2000 to 2003 all the way till this year. I am sorry but 5 to 8 years of price gains is a bit too much for me. Especially, that now I am finally starting to see excessive splits within some of these stocks in the chemical arena. However, at the same time I see some without and not too many are excessive so I don’t want to get too excited just yet.
But the facts remain that the outlook is for our GDP to come in the negative territory the upcoming quarter. The market is a forward looking beast and a weak ecomonomy should mean weak upcoming earnings and that should mean more estimates will be taken down which only mean one thing for a stock when that happens. Kaboom and goodnight. More stocks are seeing the dark nights of Hell instead of the bright lights of Heaven, no matter if they announce great, good, even, poor, or really bad earnings. The same thing seems to be happening anyways. Lower stock prices.
This kind of tape action (there really is no tape action since January) has left me twiddling my thumbs searching hard for something that could setup for either a bullish tape move or a bearish tape move. Those that have my forums have my “pretty charts,” “nasty charts,” “toppy charts,” and “possible future longs” sections to study from to learn what is topping out and what is setting up for a potential nice long or a potential nice short. Right now, it seriously, is pretty messy.
I do have one stock that I do put up on my computer screen on zoom 4 to help me sleep well at night. That stock is APII.
