I have long said this is the unshortable market. The strength has been so unyielding, even breaking the 13-day moving average (not to mention something more serious) was impossible. In a normal market, the falling to the 20-day moving average is very normal, even in an uptrend. But those moments have been extremely rare the past six months.
What I was looking for a month ago when the market broke down due to Egypt was a fall through the 20-day moving average. That did happen, and the market closed on the lows of the day (and week). In normal times that is a very bad development for the technical structure of the market.
But I was wary. Why? Because it happened on a Friday, and since March 2009 almost all gains have come on (a) premarket surges Monday morning, or (b) the first day of the month. And after the Friday that Egypt was roiled came Monday + the first day of the month (Tuesday). Like clockwork, the market gapped up Monday and was at yearly highs by Tuesday. So much for the technical condition.
This time around, Monday is still a few days away, as is the first day of the month. So the bears might have a small window of opportunity. Now neither of these days should really mean anything, but the psychological impact of seeing those types of days always works for the bulls and feeds on itself. What would be truly striking would be a poor Monday premarket and/or a poor first day of the month -- talk about a change in character.
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