Are Dip Buyers Really This Impatient?

An interesting event occurred right at the close yesterday. In afternoon trading the indices broke down and from 2 p.m. until the close all major indices traded in bear flag patterns. This is a typical pattern that suckers in pullback traders and that generally signals the beginning of a correction. What is unusual this time is the heavy volume after 2p.m., which culminated into a very large buying spike at the close. Could it be that buyers are so eager to get in that they are refusing to wait for a proper pullback? If this does turn out to be the case and yesterday's bear flag fails we could see a mad scramble. Such a scenario would have pullback buyers in the wings battling with the bears who just shorted what they thought was the top. This would create an explosive situation where prices are driven much higher than most market analysts now consider reasonable. What to watch for: If the QQQQ moves (not just quickly dips, but actually moves) below $42.80, then yesterday's bear flag will have succeeded and we will likely see further pulling back from current levels. If not, then today and next week could see some fireworks.