BULL TRAP's Not Good (Enough) for Bears

A picture's worth a thousand words... Chart below shows the Trap Door setup. When bulls couldn't find ways to get out, they stayed put, which in turn diminished the selling pressure. And, after the selling had dissipated, the shorts came in to cover and thus formed a bullish double bottom. After reaching the DB breakout target of approx. 1136.66, the SPX then dropped back to close at 1136. Assuming most of yesterday's late bulls had been trapped, it should be safe to assume the only selling today were done by those who had bought in the afternoon on Wednesday, the 13th. In that sense, this ain't the real selling yet. The real selling should come next week. The Price-by-Volume bars (horizontal) on this SPY chart below shows where the buying (covering) came in. They were all red bars (selling) until the price hit the 113.9-114 level.

From the breadth and volume area, no sell signal was given today...only corrective action. In fact, we're now very close to a significant internal bottom (amazing as it might be). Fib

From the breadth and volume area, no sell signal was given today...only corrective action.

In fact, we're now very close to a significant internal bottom (amazing as it might be).

Fib

Hey Fib,

You and I are living in different universe. Whenever I'm seeing white, you're seeing black. From where I'm sitting, it'll have to take a few good days of selling to reach a short-term bottom. The divergence between the current price level and my volume weighted price level is simply too great to carry on without correcting.

Edited by TechMan, 15 January 2010 - 06:58 PM.

You and I are living in different universe. Whenever I'm seeing white, you're seeing black.

We're just looking at the markets in a different context. My comments are more of a short to intermediate term nature, that of 4-6 weeks. There can be, of course, choppy action before, during, and after this time context.

The comment about a significant low, however, suggests that another day of decay like today and we'll have a tradable internal bottom. But with our being as buoyant as we are, the double bottom you've pointed out on your chart could more significant than what you're giving it credit for.

Fib

You and I are living in different universe. Whenever I'm seeing white, you're seeing black.

We're just looking at the markets in a different context. My comments are more of a short to intermediate term nature, that of 4-6 weeks. There can be, of course, choppy action before, during, and after this time context.

The comment about a significant low, however, suggests that another day of decay like today and we'll have a tradable internal bottom. But with our being as buoyant as we are, the double bottom you've pointed out on your chart could more significant than what you're giving it credit for.

Fib

FAIR ENOUGH... Have a great weekend!