Today is May Day, but it was Monday that was most unfriendly to free markets everywhere.
Bears have an opportunity here. Despite the fact that there are too many shorting this market, technically indices have the potential to roll over here. All it would take is one good follow through day from yesterday’s selling.
This is a very tricky tape here. For we have seen this set up many times over the past 8-9 months, and as often as not bears have proven to have fired all their shots early and bulls step back in to buy the dips.
The bearish argument here is: a swift loss of last week’s momentum, overly bullish sentiment by some readings, a heavy distribution day yesterday, and a broad range of indices in danger of rolling over.
The bullish argument here is: too many put buyers eagerly shorted the indices yesterday, the broader trend is up, and bears may or may not be out of gas.
As you can see, the bearish argument has a bit more “oomph!” to it.
Even so, this is not the type of trading environment that is easy to make money in by any stretch of the phrase. Trying to nail down a top is just as dangerous as fighting the tape. In other words, it is not an easy decision to make whether or not to approach the market as a bull or a bear today. It’s probably best to sit back and take a neutral position of “wait and see.”
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