Is that a top?
Sorry for the absence of updates for the past few weeks. But I guess there wasn’t much to update anyway. Everyday was another new all-time high on the Dow and multi-year high on the S&P 500.
Even after the Fed on Wednesday, buyers jumped in when prices dipped. However, yesterday was different. Dow crashed 147.74 points, S&P 500 crashed 21.11 points and Russell 2000 crashed 16.14 point. On Tuesday, we saw some churning when volume increased without a significant change in price. One possible explanation was that institution players were selling into strength and bullish retail traders who were late to this party tried to get in. When we saw institution players trying to lighten their load before the Fed, we thought: “that’s it, that’s the end of the party.†But no, prices climbed up as the day went by. What we discovered after the market closed was that although there were more buyers than sellers on Wednesday, there were more sellers when the prices were going down than there were buyers when the prices were going up.
All these developments led to a major correction yesterday. We’ll have to wait and see how this affect the entire market because one down day is simply not enough to reverse such a strong bullish market. Die-hard bulls will see this as simply a correction and nothing else. Some may even buy more now to catch the bottom. I don’t think there are many bears in the market now so how this downward drift can sustain itself depend a lot on the major players and any event of bad news. Although there are not many bears out there, there are many bulls with stop orders. There is a chance that the downward move may be fueled by the triggers of these stops. Some bulls will cash in their profit some will hold. We shall know which camp has more bulls in the next few sessions.
May expiration is drawing very near. We are hoping to close up most of our positions very soon. Yesterday’s down move offers some relief to some of our positions. We’ll wait and see how this move develops then find a chance to close up our positions. With 35 days to June expiration, we will be initiating new positions for June soon.
We’ll be in touch.
Gary
