The Shortists Can’t Bring the Market Down

Dow Jones DJI 12 Jan 2012

Although it seems that the bulls and bears are still fighting to determine the market’s direction, it’s telling me that the bulls may have the upper hand now.

Why do I say that?

The above chart is the DJI (click for bigger view). Price is now clearly above the 200-day moving average, so it’s towards the bullish bias. Not only that, price also did not ever close below the T-line (8 EMA) for the past 15 days. The trend up is slow and steady, which is good because if it’s a parabolic rally, it will not be able to sustain.

Yesterday DJI started negative. But towards the closing time, the market recovered, as shown with the doji candle with lower shadow. There were buying pressure.

The shortists (the perma bears who are already well-conditioned to short from the downtrend last year) who shorted these few days just cannot bring the market down – – The market just keeps going up, which means they are LOSING money now. Somehow they will be forced to cover their positions sooner or later, which adds more fuel to the buying.

Yes, I agree that based on fundamental reasons, the market should be down all the way because of the EURO and US debt issues. The govt. are just kicking the can down the road. The next financial crisis is inevitable and will be more severe than in 2008 (my view). But it’s just not happening now. The market is not always rational. The chart is telling me that the bulls are stronger now.

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