Written by Rich B. Meier
TopEquityNews.com
Yesterday, Top Equity News wrote about the critical support and resistance levels and marked them on the technical map for you. On cue, the NASDAQ drops and settles just a hair above the sell-signal trigger point of 2600. It is remarkably self-fulfilling how imaginary lines on a chart can be so accurate.
However, if you pay attention, you’ll see that market makers and specialists will move the markets (stocks too) below (or above depending on the situation) key technical positions intra-day. They know where the “X” on the map is too. So, they go stop fishing looking for cheap stock, expecting the programs to kick in and reverse the course of action.
Investors tend to clump their stop orders just below or above technical landmarks. On little to no volume, market makers can knock a stock up or down a quarter or two and trigger a bunch of orders. On a day like Monday, they pick up thousands of shares near the day’s bottom, wait for the buy programs and short-covering to kick in, and sell their shares for a quick profit. It’s great work if you can get it.
It was text-book yesterday. The NASDAQ spent a lot of the day under the 2600 mark, only to rally the last 30 minutes. The market makers had a great day printing money. Of course, it’s not always a golden pathway to OZ; sometimes they end up under a house too.
The moral of the story, as far as the average investor is concerned, is to play along. Don’t be afraid to nibble around the edges when stocks first move above or below technical watermarks. More often than not, it’s usually low hanging profit fruit.
The other lesson is not to put stops/limits up against obvious buy/sell points. The sharks see the blood and are all too eager to take the bait and scare you out of the water – free food with little risk – all on your dime.
Moving on to today, odds are one of two things will happen, the market will dip, test yesterday’s low around 2591 – again looking for nervous hands – and then confidently march up. Alternatively, we will start out green, looking for buyers so stock can be sold short, and then bam, say goodbye to 2600 for a while.
TEN certainly would prefer the drop and pop variety, but in either case, it’s easy to build a strategy around either scenario. If the selling wave overwhelms the breakwater at 2600, just pick up a few shares of an inverse ETF like ProShares Short QQQ (PSQ) or go long the dollar with PowerShares DB US Dollar Index Bullish (UUP). Both should look pretty in your portfolio if Wall Street gets ugly.
On the flip side, if the Euro Lucys put another debt football on the field or the Retail Sales Report invigorates bulls, you can pretty much pick up any market leader. Another rebound would make 2600 an even harder target to break. Just remember to cut losses if the safety net fails to catch a falling market, but no so close to get caught in the market makers’ fishing net.
Stock Market Trends: Out Fishing for Sucker-Fish is an article from: 
