Thursday, December 08, 2011

Finally a decent correction after the rally

Some may blame the market decline on news or lack of news from Europe, but the simply truth is that traders and short-term speculators were itching to incite a little profit-taking after the big rally last week. After moving sideways for a few days, there were only two directions to go and there wasn't a lot of incentive to go up, so traders and short-term speculators took advantage of anxiety over Europe as their trigger excuse. The real killer was probably the combination of an exhausted rally, a mind-numbing two-day summit in Europe, and the impending weekend. A decline was "the path of least resistance."
Technically, the psychological resistance level of 12,000 for the Dow was breached, but only by a hair (11,998), and right at the close, so the Dow is now right on the razor's edge. Technically, a further decline might be obvious, but if too many people think it is that obvious, then the best trade is to bet against the crowd.


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