Evidence in the Zone
Sometimes those news headlines stun me. I know they have to headline each story, but they really can be amazing. It just crossed the Dow Jones Headlines on my ILX that "The US State Department skeptical Saddam Hussein would accept exile."
So much sarcasm so early - I guess my New Year's Resolution should have been "don't do what I do, do what I say!"
The tape continues to hold the gains despite the very recent memory of pain and frustration. What is the difference between today and Tuesday? Today buyers can say, "I have the whole year to make up for any mistakes." Tuesday that only meant a couple of hours, so "why take the risk," -especially given that one can be right on time or price but it is almost impossible to be right on both.
Tuesday it seemed impossible that the major indices could retest their early December highs and today it seems a little more possible. Funny how this psychology thing works.
This is a very tricky tape, which is what happens in the twilight zone. Again, the market and its components looked like they were going to crack and were breaking or testing important support levels. Last Friday, I wrote a piece about how the twilight zone thesis was being tested by IBM. In the twilight zone, psychology should be more important than price. IBM passed the test because it broke down and has since bounced back beyond the breakdown price due to its (and the market's) oversold condition.
The IBM example is a good sign that there could be a retest of the early December levels, but as I suggested this morning, once we approach or even surpass them, the issues that hurt us before will likely still be there and have more influence because the psychology is likely to get better with the price.
As more time in the twilight zone trade passes, the closer we get to the reality trade.
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