Today was a very strong day from a price perspective, We advanced roughly 1.5%, and broke through a previous resistance level which caused a short term higher high to occur.
That’s the good news, now the bad …
I over the last 12 months, you only were in the market today … you would have done better than if you were in an index fund for the entire 2011 year. 2011 results were roughly flat (slightly negative) which means if you invested on day one, you would have ended the year in roughly the same position. Another perfect example in my opinion that buy and hold is dead, and that timing the market is everything.
In terms of today’s advance, I remain skeptical. I think it is forming a “bull trap”, trapping anyone that went long today with a loss. Volume was very light, most of the indexes closed at the bottom of their range for the day, which means that anyone that bought intraday are already underwater.
In terms of classic candlestick charting, we may be forming an evening start pattern, which is a bearish reversal pattern, but time will tell if that is the case.
I could be very wrong here, but I just don’t get a good vibe from this move and my end of day analysis doesn’t corroborate the price change. My gut says that we will be seeing much lower prices by Friday or Monday at the latest.
Tomorrow’s movement will be critical in my mind. If we can move strongly up, then this will tell me that my analysis was wrong and I will get on the bulls side, but if we close flat or down, it is likely that I will add to my short positions. We need one more day to see how the players want to play.