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Again I ask: What type of markets do 4% up days usually happen in?

Recs

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May 26, 2010 – Comments (11)

I will give you a hint: it's not bull markets. Huge up days are most likely reactions within bear markets. I was pointing this out the last time we had a huge rally: What type of markets do 4% up days happen in? - http://caps.fool.com/Blogs/ViewPost.aspx?bpid=389185.



ENLARGE

I was even pointing this out in my last post: Bearish Confirmation - http://caps.fool.com/Blogs/ViewPost.aspx?bpid=396519

There will be rallies to be sure. And some of them will be impressive. But like I was pointing out before, we get the most spectacular rallies as reactions within bear markets. And I now believe these peaks will be shorted, just as in opposition the last year and a half all the dips were bought.

I mention this now because today promises to be a another large up day. Spectuacular even. Which should make one skeptical of the "beginnings of a new major bull run" calls. Crazy days full of reversals and volatility are more often hallmarks of bear markets than bull markets.

11 Comments – Post Your Own

#1) On May 26, 2010 at 9:45 AM, TMFDeej (99.33) wrote:

The answer is volatile ones.  What do I win? ;)

Deej 

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#2) On May 26, 2010 at 9:46 AM, binve (< 20) wrote:

TMFDeej ,

A portfolio of expired VXX calls!! :)..

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#3) On May 26, 2010 at 9:56 AM, TMFDeej (99.33) wrote:

HA

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#4) On May 26, 2010 at 10:17 AM, IIcx (< 20) wrote:

short squeeze (shorts have been holding overnight lately - announced on CNBC last night), we need to see the Euro strengthen for this to be a moon shot -- it should be a wild ride this week.

 

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#5) On May 26, 2010 at 10:26 AM, binve (< 20) wrote:

IIcx ,

I agree. (I have been one of those holding shorts overnight). But I did so weeks ago during the 4% spike up. And even added on the spike. And I felt comfortable with that decision. I still do. Until we start to challenge 1140, this still says 'reaction' to me.

>>it should be a wild ride this week.

Agreed!..

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#6) On May 26, 2010 at 10:29 AM, bothisellhigher (29.04) wrote:

Love wild rides!

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#7) On May 26, 2010 at 10:33 AM, binve (< 20) wrote:

bothisellhigher ,

Wheee!!! :)..

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#8) On May 26, 2010 at 3:39 PM, outoffocus (23.07) wrote:

Well that didnt last long.

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#9) On May 26, 2010 at 3:46 PM, binve (< 20) wrote:

outoffocus,

nope.

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#10) On May 26, 2010 at 4:32 PM, chimpcontest (< 20) wrote:

I still believe the market is tied to residential homebuilding and not as much Europe.  The market is looking in the rear view mirror when it looks at the recent housing daa on new homes

"The latest monthly new home sales figures were just released. New home sales for April spiked 14.8% month-over-month to an annualized rate of 504,000, which is well above the rate of 425,000 that many had forecast. Still, the stronger-than-expected climb wasn't as sharp as the near 30% surge that was recorded for the prior month. "

Everything that happened to new homes and homebuilders from March 2009 (which coincided with the market bottom) and April 2010 was a result of govt intervention.  When homebuilders start talking soon about negative YOY traffic and sign ups watch the market and builder stocks pull back.

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#11) On May 26, 2010 at 4:38 PM, binve (< 20) wrote:

chimpcontest ,

Hey FB! I agree with you. I have been watching the new homebuilders numbers (as opposed to existing home sales) like you talked about before.

But I disagree, because I think soverign debt troubles and worries are what will cause the next major pullback. 2008 was primarly a deleveraging crisis. 2010/2011 will be marked by a sovereign debt crisis, IMO.

Thanks man!..

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