Bull Trap Or Bear Trap?

Friday was no fluke: we have now given back all of the FOMC rally and then some. While we are not yet ready to get bearish, as we do have a strong support level just below, this is not a good sign: the Fed gives the market the green light, and the market turns tail and runs.  We have a week left in the month, ans so far the pivot points have done a pretty good job of marking limits, so we are likely to end the month near one of them, but we don;t know which one yet.

The Nasdaq, which had been threatening to lag the market, is now leading again, which means on a day like today that is drops less. If anything, that hints that the overall market may be stronger than it looks in the last couple of days, and that this is more of a shakeout that will result in another move up when it is done.

The Dow is the weakest of the indexes, which is another potentially bullish sign. It is sitting right in a pivot point and just above the 50dma, so it is very likely that this down move has just about run it’s course. It could lead to a weakm bounce or a strong rally, at this point we have no idea.

The Russell 2000 is now again taking leadership, with price relative breaking out today, and the drop being very mild. This is also suggesting we may be in for at least a fairly strong rally going into month end.

Whether the Fed set a bull trap last week, or the market is setting a bear ttrap now is unclear, but with the market so far holding critical support, I think it is likely we will get a rally going into month end. What happens after that is beyond my psychic abilities.

I will have the new highs update shortly..