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Bear Market Rally

Yesterday morning the markets gapped open on the annoncement of China’s $586 billion economic stimulus package.  The dow reached an early morning high of 9133 which so happens was the 20 period ma on the daily chart.  The markets had rallied about 1300 points inthe last couple of weeks going into the election. There was some legitimate buying, meaning there were some great opportunities to buy some quality stocks on the cheap. This buying in turn created a short covering rally, which then created some more buying. This buying was now created because of the “missing the boat” scenario in which retail investors feel that they are going to miss the great opportunity.  The fact that the market sold off yesterday at resistance on positive news is a great reason to believe we have reached a short term high and we now can begin to feel more comfortable with our short positions. There is sill a lot of unanswered questions:  will ford and gm be bailed out or in fact possibly go bankrupt? Is goldman sachs hiding bad assets on their books?  Is the unemployment rate going to go to 8% as many believe?  Until we have some of these answers the markets are going to gyrate erratically as traders jockey for position. For us, we will follow the order flow. Right now the order flow is predominately to the downside, however, we will expect sharp moves to upside so we will always have trailing stops on our profits

 

www.keystonetradinggroup.com

www.keystonetradingconcepts.com

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