Give me ONE rational explanation for Today's rally

Traders should always appreciate that markets do not go up or down in a straight line. Put up a daily chart of S&P, let's say from 2000, and observe price action. Having understood and accepted this basic fact of the markets, one should not expect the markets to go up or down every day, even in the most intense bear or bull market.

What happened today? Markets drifted lower, tried to rally but was sold each time (put up a 20-MA on a ES 5-min chart and observe pullbacks, usually on lower volume). When the markets could not rally over 850 the selling intensified with 843 being the breakdown level that targeted 815 or lower.

Every S&P trader knew, or should have known, that when the markets broke down it was going to test the previous lows and supports - 833, 820, and 815.

It went through 833 like the proverbial knife through hot butter, then to 826, then 820, came up back a bit, then went down to test 815. Everyone also knew that if support held then a bounce was inevitable; everyone also knew that the market was testing the multi-year lows and if it held then off to the races on the upside. When the majority of traders are looking for such action and they accept that the test was successful then all act in the same way: buy buy buy.

The above is basic stuff, no mystery, no secret, no conspiracy theories, and PPT crap. But, you've got to keep an open mind, neither preconceived bearishness or bullishness but trade the market. BTW, who cares if PPT cause the markets to rally? If you trade the market then you are concerned with price action, no matter who or what caused price to move. But if you are more interested in finding our why? who?when? etc then your focus will not be on trading, in which case, most likely you will not be profitable.
 
Quote from oktiri:

--Job numbers were horrific
--INTC drops guidance drastically
-- Germany officially enters recession

We go lower, -300
THEN WHAT ? WE TEST THE LOWS SO WHAT ? the fact we didn't crash through, DOW gains 550 ?
Where is the logic ?
More...
I am curious - what did you expect to happen? (along with the other folks who started threads like this?)

In the last few days, it became pretty obvious that we'd probably test the lows. Since I'm not a good prognosticator, it made sense to play with a few scenarios that might happen when we got in the vicinity - so I'd be prepared. ie: what was the trading action the 1st time we got down here ... and then - what else might happen?

Since 11/4, many traders have been getting aggressively short (on top of the the ones who've been short). There's a well-publicized hedge fund redemption deadline this Saturday. With the performance of the mkts, many folks want their money out. This is obviously known. Between hedge funds being forced to raise cash and shorts leaning on the mkt >> we retest the lows.

The retest is the point that many, many people have been waiting for to officially call a bottom. Many have been drooling waiting for an opportunity to buy on a successful retest of the lows. Longs come pouring into the mkt - at the same time - shorts start seeing their unrealized profits potentially going up in smoke. More 'investment' longs feeling left behind - as well as traders feeling they're 'missing the move' >> major, major squeeze....

Fear & greed. We got a great example of it today.

Personally, I'd love to trade on bigger theories like I outlined above but since I can't do it consistently - that's a hobby. My edge is reading price action & trading. After the mini-capitulation move @ 1pm, there was a HL from 1:03 to 1:06 that made a great short-term entry. I figured we'd at least go up to test the 837 level - but we kept going.... This was a dream day for traders .... sure don't get many like it!! :eek: :eek: ... :cool:

R
 
o k. i've gone thru what i could, and figure this is just a retracement. we will retest the low....as this is usually tested twice, by my calculations, we will go below 815....before making an interim bottom
 
Quote from oktiri:

--Job numbers were horrific
--INTC drops guidance drastically
-- Germany officially enters recession

We go lower, -300
THEN WHAT ? WE TEST THE LOWS SO WHAT ? the fact we didn't crash through, DOW gains 550 ?
Where is the logic ?
More...


This is what you call a BEAR MARKET RALLY.

Nothing else but a BEAR MARKET RALLY. Anyone who thinks this is the beginning of a new bull market is a complete IDIOT.
 
Quote from stock_trad3r:

I'l repost what I wrote earlier:

It seems all the econ data is priced in, as we saw in the prior two weeks. Bad sales numbers, housing data are expected. What matters more importantly is the outlook.

These huge funds run by smart people realize that the feds' bailouts, stimulus packages, and rate cuts will create an environment for sustained, multi-year growth and are loading up before the future econ data cofirms this. Also, the extent of the so called "recession" is very shallow. Even 8% unemployment (if it should get that high) and even a 2% contraction in GDP isn't a big deal by historical standards.

Finally, bear markets and recessions tend to be very brief and usually last no longer than 1-2 years. The recession tends to last just eight months. The reason why this so is because of fed intervention, free trade, and consumer spending.

I could go on, but I feel more confident about being long now (even with a large loss) than ever before.
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Wrong wrong wrong! You feal confident being long when a depression is still on the table?
 
Quote from S2007S:

This is what you call a BEAR MARKET RALLY.

Nothing else but a BEAR MARKET RALLY. Anyone who thinks this is the beginning of a new bull market is a complete IDIOT.
More...

Agreed. I would go further to say that it was more of technical rally. S&P tested its low and held so the bulls did some bottom feeding and blew some shorts out of the water at the same time. Nothing more nothing less. Tomorrow will probably see a pop then back to sell sell sell.
 
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