Redline - Too Much, Too Fast

The market has moved so fast and blown through all resistance levels in a few days. We are extremely over bought in the short term and looking for the market to pull back. The S&P has moved up over 13% in last 12 trading days without even giving back 2%. Very unusual and not normal market action.

Whether it is computer related buy programs and/or high frequency trading driving this up, we are seeing a fear of missing out in the market.

So, we are positioned for at least a small correction, if not something bigger.

Remember the Nasdaq in 1999 to 2000. The further the market goes without a setback, the harder the fall when it develops.

Market in hyperdrive

Will the bulls get tired? Option Expiration week can have a buy bias & it certaily has this week. The computer buy programs have been at a zenith level. However, there has been so much power put into this move up over the last three days, that it may not have much energy left. This resembles an exhaustion gap up move. When the "buy at any price" crew leaves, the correction is usually sharp and very unpleasant. Thus, we are closely monitoring the situation for a short entry that will most likely present itself over the next few days.

Lack of Buyers in the market

Low interest in the market by institutions has created an environment where there were no sustainable rallies today. The market is in a tug of war between the bulls and bears, where the short term looks oversold, but the mid term still shows the market having some excess to work off. It should have been easy for the bulls or bears to score some points and give the market some direction.

So, we are left to see if the bulls will take it back above 905 or if the bears will make their move and push prices lower. Then the market will need to do some consolidation at a lower level before the next move up takes place.

Market Outlook

DCM believes that the equity markets will continue to be volatile and the indices may ultimately be very close to where they are today over time.