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Where Is This Market Taking Us

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May 24, 2011 – Comments (1) | RELATED TICKERS: SPY

For most of this month the bears have thrown around the bulls like some red-headed, left-handed, step-child. At this point, we are in a steep decending channel, and as it stands right now, we are on the bottom end of that channel, which means for the bears the risk far out weighs the reward, unless they are able to somehow break through the bottom end of that channel, at which point, the bottom falls out of the market.  

At this point, I haven't shorted the market at all, instead I still trade to the upside, taking the opportunities where I can find them and I believe in the short-term the bulls have the ball in their court to push the market back closer to the upper band. At which point, I'd probably sell the rally. 

Here's the S&P Chart Analysis.

1 Comments – Post Your Own

#1) On May 24, 2011 at 3:02 PM, davejh23 (< 20) wrote:

"...which means for the bears the risk far out weighs the reward..."

This is very short term thinking.  The market is trending downwards.  Daily and weekly charts look bearish.  Financials haven't moved in 18 months and are down 10% in the last 3.  50% of stocks have fallen below their 50 day averages.  Every regional manufacturing index has shown significant weakening or contraction.  Major world economies are contracting.  There are some very negative trends developing that will hurt future profits.  Why would you buy dips in a market when the overall trend is down?...you even acknowledged the possibility that the "bottom falls out".  Isn't this risk far greater than the risk of the roof blowing off?  I wouldn't encourage going all in short, but I'd definitely say it's safer to play the short side for now...trade for quick gains until the trend reverses. 

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