Ian Woodward's Investing Blog

Bear Market Rally – It’s a Toss Up!

It has taken three months of trading in essentially a tight trading range to finally
produce a classic conundrum for the Bulls and Bears.  We have now reached the
point where it becomes a toss of the coin as to which way the Market goes.

Coin Toss

As I often say, “Beauty is in the eyes of the beholder”.  If you are a Bull, the T/A types
will favor an Inverse Head and Shoulders; if you are a Bear it’s an Inverse High
Tight Flag.  Since we are in a Bear Market Rally the long term trend is still down:

chart

When the direction is not that obvious, don’t second guess the trend…let the
Market tell you which way it is headed.  Be prepared to go either way for the
Type 1 and 2 Traders who are nimble.  For Type 3 sit and wait is the best call at
this stage if you have not participated in the tepid Bear Market Rally so far,
despite the fact that we are up over 20% from the Base Low.

If you are in the Market, then the Lines in the Sand at 840 and 940 tell you what
to do either to the down side or for the next leg up out of this mess.

In the short term, what are the two big factors for the week?  My guess is:

1.  The Bulls feel there is euphoria in the cards with the coming Inaugaration

2.  The Bears point to the expected poor Earnings Reports to come

Take your pick.  Best regards, Ian.

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Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.