Tuesday, October 31, 2006
The trend is showing signs of topping as money flow figures have been decreasing even as prices have remained flat. Tops take time to form since smart money sells into rallies slowly in order to avoid a panic before their positions are unraveled and they have been able to put on their shorts. It is very likely that this is the process that is occurring at current levels. Meanwhile, overly eager bears keep trying to short this market. We think they are too early. In fact, there are a number of stocks where bears have been pressing too hard, trying to break stocks down against the still in tact uptrend. This is a situation that is likely to lead to a series of false breakdowns and short squeezes that can be taken advantage of.