-- Posted Wednesday, 27 January 2010 | Digg This Article
| | Source: GoldSeek.com
Rick’s Picks
Wednesday, January 27, 2009
“Phenomenally accurate forecasts”
Yesterday’s failed rally demonstrated once again that short-covering remains the only force capable of pushing stocks higher on a given day. It also showed that there are no longer enough nervous bears around to drive the market into a sustainable uptrend. In this latest show of false strength, the Dow Industrials achieved maximum loft about midway into Tuesday’s session, when they were up about 100 points. But the set-up for this bull-less rally came the night before. As is nearly always the case, activity in the electronic index futures was used to catalyze buying urgency on the next day’s opening. Notice in the chart below how the E-Mini S&P futures were actually down significantly Monday night. Shortly after midnight EST, eight hours after night trading began, the E-Mini S&P hit a low of 1081.00, down 11.25 points from the previous day’s settlement price. At that point, the futures were predicting that the Dow Industrials would open down almost 100 points on Tuesday.
Lo, over the next eight hours, in the dead of the New York Stock Exchange’s night, they recouped all of the lost ground before dropping back slightly just ahead of the opening bell. Bears must have been pretty nervous at that point, since the futures had been trending higher for nearly ten hours. The short-covering panic that followed caused the E-Mini S&P to rally 10 points in the space of an hour, and the Dow to surge 84 points. Stocks then pulled back a bit to get second wind, which was used to push the Dow a further 80 points over the next two-and-a-half hours.
This trick has been used by DaBoyz so many times it’s a wonder it still works. The success of this ploy depends on their finding a price level; Sunday night where selling has exhausted itself. Once this occurs and the last nervous Nellies have bailed out of stocks, shares have nowhere to go but up. Occasionally the tactic backfires when night-time selling picks up momentum because of bearish news on the tape. The NYSE specialists, having bought stock at successively lower prices throughout the night, are greeted by an avalanche of market orders on the opening. But usually, the tactic of shaking out weak sellers in off-hours trading produces a floor beneath which the broad averages are unlikely to fall, save on those extremely rare days when bears romp from bell to bell.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2010, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 27 January 2010 | Digg This Article | Source: GoldSeek.com
