Thursday, November 5, 2009

Yet Another "V" Shaped Bounce- Old Patterns Seem Useless

I will say if someone gave me any sort of odds on a V shaped bounce today coming off a late day selloff yesterday that had pushed the S&P 500 to (if you use exponential) or below (if you use simple) the 50 day moving average, I would have taken the opposite side of that wager.  I would have been wrong.  In front of a market moving economic report premarket Friday, no less.  I have been scratching my head at some of the things we've seen from an "action" point of view the past 4-5 months; I continue to scratch.

The market really does not act as it traditionally has... I am not the only one who sees this.  If it's computers or "the invisible hand" or some combination of, I don't know.   Some smattering of comments over at


The problem is that trusting that this is another V-shaped bounce just like those at the beginning of September and October is a very tough call, especially with the jobs report pending tomorrow.

Right now it looks like the exact same pattern that we have seen the last two months. We sell off sharply and look ready to gain downside momentum as the month starts, but the buyers make a stand and send us straight back up. As I've commented, that is not what you normally expect to see technically, but it has happened consistently in this market.

So the million-dollar question is whether the pattern of V-shaped bounces to start the month continues or whether we stall out as we run into overhead resistance. I have to stick with the charts and question how easily we can go straight back up, but this market has made those who stick with a disciplined approach look foolish. It could easily happen again.


The strange thing about this market is the lack of counteractive trading... Normally the dynamics of greed/fear will create selling when we pop up big and buying when we drop big.. The bigger the better which will create oscillations that a trader can play... This market tends to move up and go flat... Move down and go flat, so if a trader misses the big moves they are left with little to profit from.. Tough trading.


I agree with Ken and Rev's frustration with the unnatural shapes of patterns these days. I really can't reconcile my technically oriented market view with V-shaped price movement, which is permissible but rare in chart lore. I gave up trying to predict V bottoms and tops years ago, resigning myself to the fact they sometimes happen and, when they do, chances are I'll miss out on the opportunity,

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