ETF Trading with Larry Connors: Scared Money Puts Pressure on Prices
Yesterday’s battle of “the hedge funds selling everything” versus “the Obama administration needs this market to go higher” was won by the guys in Washington. Sometimes it’s good to see to see those guys win.
Obviously a slew of buy programs hit the market at exactly 2:45 pm on Tuesday and moved the major indices 6% higher in 75 minutes. I’m not fond of the game when it’s played like this, but it’s gone on for years (since at least 1987, possible even earlier). Now it becomes a battle of wills.
I expect early morning pressure on prices today due to all the scared money in the market place. Yesterday’s bounce will be viewed by many as their chance to get out. The key is what happens after the scared money bails. Does it trigger further fear, with selling leading to more selling? If it doesn’t, then the market will rally, likely substantially. Today is going to be key – a higher close will be a good short-term sign.
Overall the market will remain highly sensitive to any type of news (especially negative news). Once it starts ignoring the negative news, a longer-term bottom will arrive. Overall though, nearly all the major world indices are under their 200-day ma and that means volatility is going to continue. Please continue to use extra caution here, especially today.
The above is from Larry Connors’ Daily Battle Plan.
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Larry Connors is founder and CEO of TradingMarkets.com.