Looks Like A Bear To Me

In my trading plan for this week I speculated about the bullish and bearish scenario for stock market a little bit. And up to now the market action suggests a bearish scenario is more probable. Eventhough we got a quick rally up to 1300 resistance, which I presumed will happen in any case, the rally was on very poor volume. This indicates there is no real interest from big players to buy the rally and without any significant accumulation in the background a sustained push higher is not likely.

Anyway, I analyze market behavior on a day to day basis and this time will be no different. The following days will reveal the intent of market makers. Now, the biggest question is what was going on throughout Monday's and Tuesday's up move. If big money was slowly accumulating stocks, we should get a real follow through day very soon as many stocks will break out of their bases. On the other hand, if there was no buying by major players, this rally should fizzle out very quick. The first down day that we get should provide at least some resolution. If it is low volume down day, this means there was no selling behind the rally. If it is high volume down day, a distribution day, this means the rally has been sold into and that further decline is most probable.

I was considering buying some minor positions into Tuesday's close just to test the waters, but I'm glad I was able to resist the temptation. It is obviously still too early and this market hasn't proved itself a one bit. Until I see some real momentum in any direction I'm staying on the sidelines.