Double Trouble?

The Market rallied yet again – stealing the ‘follow-through victory’ for the bears from yesterday’s nasty reversal to the downside. Those dip-buyers simply won’t quit and will not go away until they experience some tough failures. As long as they continue to be rewarded for their mindless dip-buying into the slightest intra-day support, they will hang around like a nasty cold in the winter for the bears. Speaking of cold, the warm weather in the East coupled with the EIA report (of possible reduced demand for energy) did an “E I E I O” to the energy bulls pounding the oil and gold related stocks and reversing yesterday’s nice gains. Most likely, this will present itself as a buying opportunity. However, today’s pullback in that complex was a good excuse for the general averages to stage today’s upside advance.

Did anyone notice how overall volume in the major averages was significantly weaker compared to yesterday when the market swooned? New highs in the NASDAQ were also severely lacking considering that the index itself is within a few points of its 5 ¾ year high. We might have the makings of a double top formation with today’s action resembling a ‘reflex bounce’. The bears need to be careful not to press too aggressively at this juncture but should be mindful that a double top may be forming.

If You Held A Taser To Our Head

Unfortunately for the bears, we have seen this setup numerous times over the past few months – only to have the market morph into something more enduring on the upside. Remember, the action may soon resemble a double top, but this market has taught us that anticipation can be rather unhealthy financially -- and, to massacre Johnny Cochran’s famous defense: 'if the double top doesn’t fit, the bears must quit'. That said, bears may choose to be a little more aggressive early next week hoping to catch complacent bulls off guard.

Hope you traded well – and have a good weekend!

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