Who really needs to sell?

Yesterday
Well yesterday worked out great yet again based on the scenarios we had provided. We had retraced towards the 808 range as anticipated, held it twice and then setup for a suckers rally to fail, both high and low were on target with price and time. However, the definition of a suckers rally normally means breaking into new highs before falling over, we did not quite see that yesterday. We had sold off into the close but still managed a close above the important 800 range.

Now someone had asked about the big players. Let me take a minute and explain something else here that will give you even more information on the past 2 weeks. Out of all the market participants who are the ones that really are pressured to sell? .... You? me? Day Traders whether bear or bull? .... nope its institutions that have huge inventories of equities that need to be sold. As you know you cannot just push the sell button so you do not have a choice but to slowly exit out whatever it is you are holding. Now all of that makes sense and we knew that, however those institutions are out there having to compete with day traders, swing traders, the MANY bears, and other personal type investors. So if all of those groups are selling the institutions are not getting a great deal on their positions.

So what do they do? What would work best for them? - If they were the only one in the market that is trying to sell - now then it would be the best case scenario for them. So to be able to get into a situation like this what do you need to do? First you need to get rid of the bears, what better way to do this then shake them out and show even the most committed bears that they are wrong. One could say this is exactly what happened here - bring them over the last mental boundary where any bear would say this is it. Bears are now split into 2 groups of bears, the sucker bears that were now converted into bulls, and the real bears that have no choice now but to remain on the sidelines and stay light after such a big beat this month.

But this is not enough, you need new bulls as well. So what do you do? The many investors that have been in cash waiting on the sidelines have seen the most extreme rally this recession - its time to put your money back in because this is the bottom. Just take a look at CNBC and read what analysts are saying. For some reason, magically, everything is better, and a hint of news that is not horrendous is wrapped in a nice package and presented as a great move into the right direction.

So now that those institutions are in a position where they are the only ones with a desire to sell what happens next? Even the strongest bears are taking it easy at the moment and are waiting for major comfirmations before going in short strong. Many have scaled out and taken the loss so they need some more time to build up the position again. Overall the institutions got exactly what they wanted now. All I know is I want to be on the train once they make the decisions "ok here is where I will start pushing the sell button". I do not think that train starts at 825, I think we have a bit more room to go on the upside.

Ok enough of this for now, sometimes I have a tendancy to just go on without stopping.

Today
While we sold off pretty hard into the close yesterday we are still above the 800 line. Similar to yesterday we have a few scenarios yet again. But lets talk about some numbers first.

798-802 this right here needs to hold for the bulls, if we overshoot it needs to reverse quickly. A break of this range and I am confident we are going to see the 779-780 range again.

808 the turning point I had mentioned yesterday

817-818 this could be the top from here if we are unable to rally

824-828 again upper ranges at the moment. While we had this range approached yesterday it could be considered a double top and mere test of the previous close. So it did not quite get to what I was looking for personally (though it was off by less then half a point lol)

Scenario wise its a bit more difficult, we had our indecision yesterday on low volume. We have to watch fundamental news very carefully at the moment, the bulls are a bit scared and any piece of bad news could throw them off guard and cause a bit of a sell off. So watch fundamentals carefully, on the flip side any good news should confirm the bulls position but not be the reason for another rally. Again I still feel this is our current upper range here at the 800-820 range and we will need to retrace down unless we can continue sideways above the 800 for another 2 days.

Lets hope I will get my computer back up and running today =)