Bull trap in the making?

Discussion in 'Trading' started by lloyd111, Mar 22, 2007.

  1. That makes sense.. I jumped the gun too early bought GROW the day of the big drop and then the next day it dropped even more so I doubled down - only to sell it one week later for a loss. If I had held until today it would have been $$$$ inside of a loss.

    I'm playing this correction all wrong - losing $$$$, selling/buying at the wrong time and missing runs.

    #21     Mar 22, 2007
  2. doublea


    I think we are going to close higher tomorrow. On Monday, if we manage to close higher than this week's high, we are going above 1460, if not we will re-test the low.

    I'll be shorting tomorrow's close and will cover if we close higher on Monday.

    It is surprising why the bonds were down today, when the equity market is expecting no increases in rates.

    Just playing this as a game of chance.
    #22     Mar 22, 2007
  3. duard


    Bulls 1, Bears 0

    #23     Mar 22, 2007
  4. Good game plan.


    If SPX closes above 1441 THEN we will probably continue up to at least 1460. But I wouldnt use this weeks high (1437.77) as an indicator of anything.

    My gut says we will have a gravestone doji that touches the 1441 fib then falls back down to around todays close
    #24     Mar 22, 2007
  5. doublea


    SP could close above 1441 tomorow and it could go over 1441 on Monday but as long as it does not close above 1441 on Monday I'll stay with my shorts, otherwise I'll cover.
    #25     Mar 22, 2007
  6. duard



    A little while back, I mentioned a trading principle that has served me well: When we have expanding Demand or Supply, I expect a market move to continue in the short run. This is because momentum tends to peak or trough ahead of price. A while back, I applied this idea to a downside market. Let's see if this principle applies to the current strong reading in Demand.

    Going back to September, 2002 (N = 1127 trading days), I found 11 occasions in which Demand exceeded a reading of 180. To provide a point of reference, this is a level at which stocks with significant upside momentum are outnumbering those with significant downside momentum by 8:1 or greater. When that has happened, the next day in the S&P 500 Index (SPY) has been up 6 times, down 5 times for an average loss of -.22%. By comparison, the average one-day gain for the market overall during the study period was +.04%. Certainly no bullish edge there.

    When we look four days out, however, we see that the average gain following a very strong Demand reading is +.49% (9 up, 2 down). That is much stronger than the average four-day gain of .18% (632 up, 495 down).

    If we broaden the Demand criteria and look at all occasions in which Demand has exceeded 150 (N = 32), we find quite a bullish edge four days out. Specifically, SPY has averaged a gain of .82% (27 up, 5 down). There is no bullish edge for the next day's trade, however.

    What this suggests is that, in the very near term, strong upside momentum markets often take a bit of a breather before resuming their rise over the next several days. Accordingly, after strong and broad upside momentum, buying near-term weakness for a rise several days out has been a successful strategy.
    #26     Mar 22, 2007
  7. Im mostly here having fun being argumentative tonight so dont take it personally. Im very aware I can be wrong.

    Id be interested to know how that study works when you look back at the corrections of '06, '05 and '04 ... all of which had a strong pullback to resistance levels on low volume before resuming their downtrend.. just like what we are witnessing now.

    All statistics can be manilpulated to mean whatever the user wants.
    #27     Mar 22, 2007
  8. duard


    Ask Steenbarger he is a very nice and straight forward gentleman....
    #28     Mar 22, 2007
  9. One question and one question only:

    The forecasted GDP growth rate is less than 2% towards year end now, and may even come in 1.5% or less, even by moderately bullish confessionals.

    This contrasts with GDP growth of around 5% last year.

    In what environment will earnings grow enough, given such a backdrop, to justify higher share prices, and/or allow for P/E expansion???
    #29     Mar 22, 2007
  10. duard


    Aren't the markets fundamentally psychologic? I guess you can make money or be fundamentally correct. Yes we will some day correct but now? The activity lately has been very bullish. How high do we go? What's in store for Summer? Who knows. Maybe the spoos tap 1500 and then plunge. I'm not all in margined to the hilt but I'm in and being cautious locking in gains when appropriate.
    #30     Mar 22, 2007