Trader: The dead-cat bounce in U.S. stocks may be just about over and ‘Budget Progress’ is code to short the bounce

“The next 70 point move in the S&P 500 will be down, not up…”

From Peter L. Brandt:

Caveat: I am a chartist – I sniff fairy dust.

Caution: I am a trader, not an analyst. My going-in assumption on every trade is that I will be wrong and take a loss.

The charts would suggest that this week’s rally in stocks will soon run its course – that the next 70 point move in the S&P 500 index will be down, not up.

Several chart observations are worthy of note:

The weekly chart exhibits a possible 18-month rising wedge. (Note: Patterns are only confirmed once their targets are reached. Until then, a chart pattern is only speculation. Guess what? Speculation is what traders do!)

Note that the market ran past the upper boundary of the wedge (possible wedge) in September in a movement we chartists refer to as a “last-gasp throw over.”

The decline in earlier November completed this wedge (possible wedge). If this wedge interpretation is correct, the… Read full article (with chart)…


‘Budget Progress’ is code to short the bounce

from L.A. Little:

Last week I was in Las Vegas for the TradersWorld Expo, and while there, the markets were busy putting in a short-covering rally reversal on Friday morning off news that the budget talks were ” promising.” I remarked to a colleague that it’s always promising when you first shake hands, smile for the cameras and still have yet to even roll your sleeves up let alone actually do something.

This week Congress is in recess for the holidays, the president is doing a tour in Asia and the seasonally positive Thanksgiving week got off to a bang Monday with the continuation of Friday’s hammer reversal. Though it may be something more, most likely it is simply a serious press of the short positions that had begun to gather. A little house cleaning shall we say?

As the market pushes higher, my mind quickly turns back to an examination of the anchored resistance zones which remind us where this short-term demand should meet supply. Mind you, this isn’t the great trade ( that trade has already come and gone ), but it’s a good trade, especially if you are still long some stocks as I am. It’s a chance to reload short positions as price pokes its head back up after being under pressured lowered for two solid weeks.

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It is for this reason that I began my short positions again into the big bounce Monday. It’s a speculative hedge against the few longs that I am unwilling to sell at these levels — unwilling because they are long-term positions that, as long as they act well and the general market remains bullish long term, I do not wish to part with. It is for this reason that I see the money to be made over the next few weeks is the range trade using the obvious resistance zones as short setups and the anchored support area as a target for short covering and additional long purchases. Of course, the actual entry and exits will depend on the day-to-day flow of the markets and how the tests of these areas unfold.


Biderman’s Daily Edge: Market’s Dead Cat Bounce Fooling the Short Term

from TrimTabs:



  • Rough start for fiscal cliff talks (Politico)
  • Europe Fails to Seal Greek Debt-Cut Deal in IMF Clash (Bloomberg)
  • Japan’s Exports Reach Three-Year Low as Recession Looms (BBG)
  • Beggars can be angry: Greek leaders round on aid delay (FT)
  • Poll: Almost Half of ‘Underbanked’ Americans Would Skip Christmas due to Financial Woes (MoneyNews)
  • Give Thanks for Low Food Prices as They’ll Rise Next Year(Bloomberg)
  • U.S. food banks raise alarm as drought dents government supplies(Reuters)

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