The bonus round sell-off we had from the 6/21 to 7/1 can be thought of as 2 parties, you have your buyers and your sellers. For every substantial down day you can assume someone was out there making money shorting the crap out of the market and building up a short book, and for every up day you can assume somebody was scaling in long. This is dumbed down but that is the gist of it. The important thing to remember here is that big $$ doesn't just buy once and go away for a month, they are constantly averaging their book throughout most stages of a leg up or down. Now take the average price for all the major down days combined and you get an idea of where shorts will be forced to defend their avg price aka breakeven, that # this week happened to be 1060 SPX per my metrics. 1060 is the only resistance I see before 1160. The market is incredibly oversold, saying it is oversold is not always about percent moves, it can be about how many stocks are left to smack down, right now just about every stock has seen massive selling, when nearly every single stock has been hammered, you quickly run out of things to sell, the market snaps back very fast once this condition has been met, and at the least it does not see follow through to the downside (ie the few days we went below 1033 were not met with conviction). The snapback can be a flash in the pan, or it can be the catalyst for a new leg. A big factor in whether it is a flash in the pan or the start of something big is whether the market has long term momentum and support or resistance on it's side. 1060 not being defended eludes to the fact that the last leg down from 6/21 was probably being bought heavily by the same folks that were walking the market down, aka market makers and specialists, so it's fair to say that if this level holds, that all in all, it was mainly just a big accumulation move rather than a distribution move. YES folks, moves down can be pure discreet buying, this concept is what 90% of traders never seem to be capable of grasping. The way these things tend to reverse is you see small speculative buying that doesn't move the tape much, followed by some medium size institutional pumping, followed by a massive short squeeze, followed by retail and skittish mm's coming in to buy now that they have "confirmation", by now the market has usually entered a stage of pure momentum, and eventually people get greedy and stupid ( just as shorts are acting now) and things start topping out like they did in april.
The reason I am saying 1200 can come at the end of the month is because that's what all my research tells me. There is an infinitude of variables you can weigh when trying to figure out this market, everyone interprets the data differently, and not everyone looks at the same data, that's why you see so many people running around with absolutely different takes on the market. I just try to remain fair and balanced and report on what I see, I can't and don't want to share all of that T.A. that goes in to that, there really would not be a whole lot of point other than to try and impress people. I just like to report on the gist of it and stay in touch with those I have met whose logic I respect. |
