bull trap??
I am getting very skeptical of the movement in the markets. Today was kind an interesting play. the market opened up with a large gap (over 2% on the Russell 2000), then spent the day falling eventually to as low as -2%, then in the final hour the market rocketed back from the grave to end up 1.73% (russell 2000).
Over the past 3 days, 2 out of 3 were positive if you look at the numbers from market close to market close (resulting in a gain of 0.34%), but all were negative from open to close. If you bought at the open and sold at the close each day, you would have a net loss of 4.62%. This is not what healthy markets do. We clearly have a tug of war happening and I fear the bears are going to win this one … each day we seem to be getting closer and closer to the bottom of the trading range we have been in for the two months.
The Nasdaq had a big hit today which had been the leader up until today, all the big tech stocks were pummeled today, although again … the pain didnt look so bad since there was a staged recovery in the last hour.
We are at the end of the quarter tomorrow … which means a lot of shuffling and window dressing for all mutual funds and hedge funds since they to report their holdings on a quarterly basis.
End of quarter and the prices nearing the bottom of the trading range and having trouble getting even half way up into the trading range, makes me VERY skeptical of the market. It wouldnt surprise me if starting monday (first day of the new quarter) we have a big drop which will start a new downleg. OR, I could be pleasantly surprised and see the opposite occur a fast move up. Either way, I expect resolution within a few days.
With that said, I have been enjoying profits playing both sides of the market. I currently am much more long than short, but I would be lying if I didn’t admit that I am a bit nervous with my long positions. My short positions have been far more profitable than my long positions … which is probably a sign in itself. I am playing this trading range fairly aggressively and so far it has been paying off nicely, but I just don’t like the behavior I am seeing.
Good news is that I expect closure shortly as to which way we go, bad news is that I think you can tell from above which way I think we will go …
