So far this week, the market has been doing some consolidations. Although it has printed couple of shooting star or inverted hammer candles, these candles do not pose any threat to a possible reversal. Today the doji candle just further frustrates the bears and reinforces the perception that it is safe for the bulls to enter without great risk on the downside. The scenario I have stated previously is this market will not pullback to a degree that will scare the sideline money away, nor to the degree that will give satisfaction to the bears to take control on bringing the market down. Instead, the market will provide a safe entry for the anxious sideline money to come into the market on any dips, then as these anxious money starts to pile in, we will start seeing consecutive 300-500 points gain days. When that happens, the bears will be crushed and they will convert and join the bulls to push the market higher to a blowout stage. At this point, the market should start printing inverted hammer or shooting star with a big upside opening gap or a long candle shadow where the market give up more than 200 points intraday gains to close with a small fraction of the gain or even a slight loss for the day. It is at this point that the market will reverse back to its primary down trend and try to establish a bear market bottom.
Yes, I still believe this is a bear market rally. I do not believe all these government fabricated/manipulated statistics on how the economy has bottomed and a recovery is near. I don’t care if it is a V, U, or W recovery, all I know is I have not sensed any change in the economy that have made me say “things have gotten better.” I will remain long until the market tells me otherwise. I rather stay on the sideline than to short this market right now.
