Securities Research Services

Thursday, March 01, 2007

Buyers Now Face the Burden of Proof

The QQQQ failed before it was able to break through resistance at $46.00 and the S&P and Dow both rolled over after a period of consolidation just above their long term breakout levels. This doesn't mean that the market has to go down here, but it does mean that we necessarily have to take on a short bias until buyers prove themselves.

In other words, before Tuesday we were in an established up trend and the burden of proof was on the sellers. Tuesday they met that burden largely. We don't yet know if sellers have staying power, but now the burden has shifted to the longs. They must prove themselves by stepping up and buying.

Unless buying is truly spectacular over the next few days, we will consider this a dead cat bounce market phase and will be looking to work in to some short positions.


Anonymous said...

dow tested the support 12100 twice successfully. a pullback should definitively happen. the only problem now is that the market is too unstable and long positions could be easily stopped out.

SRSFinance said...

Yes, we agree, the market is unstable here. The Dow is finding temporary support, but we believe that this index must be interpreted as being in a near term downtrend here. It's quite doubtful it will be able to muster a "V" bottom or a "U" bottom if you like, but is likely to continue to feel selling pressure over the next week or more.

As you mention, long positions have the wind in front of them here.