Volatility and Bull Traps Abound!
With analysts in the media constantly discussing earnings of stocks and how they are bullish on the market, we once again find ourselves on the opposite side of the argument.
The recent selloffs in the stock market between late January and now have been staggering, showing that volatility is here to stay in 2018.
Friday, March 23, the DJI was similar to the Friday before the Crash of 1987. A number of pundits made the comparison suggesting that Monday could see another crash.
We had a different view based on our analysis. That Friday, we advised in our trading services to close out all short positions. We also wrote:
“The S&P 500 closed just above its 200-day m.a. today, which may offer mild support. However, the NYSE Composite plunged through its own 200-day m.a. today and is just 173 points away from hitting its February 9th low. That suggests that at least a brief bounce could start early next week.”
Another “bulls eye” as that’s exactly what happened the following Monday, March 26. The PPT and algos made sure that the DJI would gap up at the opening by 300 points.
The S&P 500 bounced off of its 200-day moving average. Selling eroded some of the gains after the first two hours, but then the agenda to drive stocks much higher was implemented again.
The DJI soared to a gain of 669 points by the close, one of the best gains for the DJI in history.
This was the third biggest point gain on the DJI ever and its biggest point gain since 2008, the year of the Financial Crisis crash. Bear markets typically have the sharpest rallies.
This was a typical trader trap. In February there were several such traps for the bulls, both in early February and later in the month. Here we can see that this is the ‘machines’ programmed to catch traders on the wrong side of the market.
It’s an easy way to make money. Although market manipulation is against the law, the regulators don’t seem to care if the outfits are very big. After all, it produces lots of trading volume, which is what Wall Street needs...