How long will it last?

May 25, 2006 · Print This Article

Over the past week almost everyone has called a short-term rally. Well, the rally has come and conveniently the market is entering a period of bullish seasonality. Most of the short-term rally participants are still way under considering they called the short-term bottom at the same time the bottom was falling out.

On the heels of a two-day advance the question is now “can the positive seasonality keep the market afloat for a few more trading sessions”. If the market can manage to move above what looks like strong overhead resistance and sustain those levels we could see a continuation of the advance for possibly a week. One thing is for certain, it looks like the 200 day moving-average acted as (what could be) a short-term bottom. If the Bears decide to come out and play over the next week or so we could see the 200 day MA tested once again. In most cases, this is expected, especially coming off the heels of a sharp decline.

We had another Gap Fade trade today. Unfortunately, the strategy could not continue the two trade winning streak as the market moved away from the gap opening soon after the trading day began. One thing is for certain, our stops have kept us from experiencing severe losses. Hopefully, the momentum we carried through the first few months will start up again very soon. Both strategies are still above the performance for the major market indices on the year and ultimately that is our goal. However, I would like to see us get back to the levels we reached last month and then some. As we all know options are quite volatile so things like this are expected. Onward and upward.

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