Market Reversal?

I’m still bogged down in research (grrr!) but am taking time out to toss in my two cents concerning today’s market action. The major indices are all putting in what appears to be short-term tops. How can I tell? Because of their topping tails which are forming the likes of doji stars and shooting stars, both bearish candlestick formations. (See Cooking Tools #2.) The Regional Bank Holders (RKH) and the Financial Spider (XLF) are showing similar topping patterns. What does this mean? It means we’ll likely see the markets turnaround tomorrow. Whether this is the start of a real bull run or another bear trap can’t be determined as yet. I’ve said before that I and many others much more in the know still believe there’s more unwinding left to do in the credit market and until the final shoe drops, I wouldn’t be loading up on long positions especially in financials. I think some of the turnaround in this sector can be attributed to naked short covering coming on the heels of the SEC prohibiting the practice in some stocks with threats to extend it to the entire market. I do believe that patience here will be ultimately be rewarded.

I’ll be back in full tomorrow. A bientot, mon ami.

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