Bear trap in the form of a dead cat bounce
Yesterday proved that trying to play the short side of this market so far this month and not aggressively taking gains along the way was a futile approach. With just yesterday’s dead cat bounce, the market managed to wipe out a majority of the losses on the month so far. And when you consider that 7 out of the 9 trading sessions so far this month were down or flat, that is an impressive feat.
Ask yourself, does the market have a lot of fear? A lot of panic? Then it probably isn’t the best market for heavily shorting. Meaning there isn’t a lot of emotion in the market. Sure the bears keep wiping out intraday gains, and it is down again as we head toward the open, but that has more to do with buyer apathy than seller enthusiasm.
Today will be a good test for the bulls to see if they can buy the dip early on this morning and keep the gains from being given back from yesterday’s dead cat bounce. There is some news about the British PM announcing a snap election – yeah, no one saw that coming – but the market decided to react, but this is not the kind of shock even that we saw with the Brexit or with the Italian Referendum.
So, if the bulls still want the Trump rally to keep going, they’ll need to show they are still willing to buy the dip today.
S&P 500 Chart
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