Securities Research Services

Friday, June 01, 2007

It's a Craps Shoot

Earlier this week, Rev Shark of The Street, commented that this rally is the most hated stock rally by traders he has seen in his career. We can certainly understand and agree with his point. Unlike most rallies, this rally has produced very little to trade off. Indices have been inching higher, frustrating shorts and longs alike.

Buying set ups have just not been reliable the way they normally are when indices are on the march. At the same time, those who put on shorts end up getting squeezed after being enticed in by poor performance.

The market has undergone serious high volume distribution in recent weeks, yet prices continue to find dip buyers who have been moving prices back up on light volume. Distribution days favor the bearish case, yet bearish sentiment favors the bullish case.

The difference between the two this week that has caused prices to squeeze short positions can probably be attributed to end of the month mark ups. Next week reality is likely to settle in and either the market will show us that it really is determined to move higher in this "wall of worry" environment, or the distribution top forming will finally take hold.

Right now we continue to find risk on both sides of the trade as high as we have seen.

No comments: