Thursday Aug 27, and Friday Aug 28 were rather interesting trading days on the SPY. If you go back even further to Aug 13, we have developed a lower high, and then carved a lower low on Aug 17, with another attempt at retesting the lows on Aug 19, before a powerful rally with a high of around 104 in recent days. This is what is known as a shakeout, where the big boys play games to convince people to sell (or short) when they should be doing the opposite. Now on Aug 27, we had a relatively major correction in the morning that took out previous lows I believe due to some bad economic news, only for the market to recover and to rally to near the highs for 2009, and on Friday we had a major gap up in the market due to great earning reports (I believe from DELL and Intel), marking a high on the SPY for 2009, only for the market to puke for the rest of the day. What are the big boys trying to do? Are they trying to fake people out (convincing the little fish to buy when they should be selling instead)? Judging by the ES futures (10pm EDT), it's looking more and more like Friday was a fake out, and at the minimum we'll likely have a small pullback. Longer term what will the future hold? Who knows, but I honestly don't have high hopes for the economy.
Quick comment about gold. It appears that it is ready to breakout any day now, as we are nearing the apex of a very long triangle. Although I'm biasing myself to higher gold (due to money printing), we must be flexible enough to recognize that the breakout could be to the down side.
This is why I believe that buy and hold is a losing strategy, at least for now.
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