Tuesday, March 04, 2014

A day of testing

Futures indicate that the stock markets will open sharply higher, but that's not the end of the story. Whether purported anxiety over Ukraine lingers for a few more days remains unknown, even if the actual financial impact on U.S. stocks is clearly minimal to nonexistent. The question today is whether the bounce is real or a classic dead-cat bounce. IOW, whether bearish traders and speculators use any bounce as an opportunity to "sell into any rally."
 
One scenario is that the market opens sharply higher but then the rally gradually evaporates to either just a modest gain or an outright loss.
 
Another scenario is that the higher open kicks off a short squeeze which attracts bullish speculators and the markets close even higher than the open.
 
And, of course, we could have a classic back and forth struggle with the market gains growing and diminishing all day long and flip a coin whether the close is up or down.
 
The important thing is that the close today will not be a reliable indicator of the actual medium and long-term market trend, it will just be a reaction to yesterday's reaction.
 
My belief is that the market will continue with a modest if erratic upwards trend for months, if not longer.
 
-- Jack Krupansky

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