Buy the Dip, and Remarkable Reversals

I can’t recall a time when we’ve had the exact same pattern play out so many times in a row; and when the markets reverse the move is in such straight up fashion. In the past 2 months alone, we appear to be working on reversal #3… the first two I’ve highlighted:

1. In mid August, the reversal brought on a just under 6% move in 4 sessions
2. In early September, the reversal brought on a just over 5% move in 5 sessions (and that move continued to blossom into a 8.5% gain in 10 sessions)

In and of themselves the raw % gains are not spectacular but considering each time the market was correcting (in shallow fashion) and to be followed immediately with a spike rather than any sort of consolidation period is the remarkable part. There is no resting in this market – the shallow correction is immediately followed by rapid fire ascents.

Is this the 3rd such occurrence in just 60 days? Is it really just that easy? I don’t know but until a pattern is broken, the denizens of Wall Street will continue to play it. So I won’t be betting against it until bears show an ounce of moxie – by going against pattern you will only be correct one time. And wrong each other time. We are in day 2 of this reversal and the interesting thing is if this continues through tomorrow, days 4 and 5 are chock full of market moving data. And over S&P 1080 is yet another “double top” breakout possibility – the last few of which we’ve made a lot of money in a short period of time as computers rush in to buy on this technical condition.

Seems too obvious to keep working, but obvious has been the new normal. At some point the lemmings will get trapped doing the obvious, but I’ve been saying that (wrongly) for many months.

About Mark Hanna 542 Articles

Affiliation: Hanna Capital, LLC

Mark Hanna is President and Owner of Hanna Capital, LLC, a registered investment advisory firm. Mark has been a follower of markets since the late 80s, with a focus on individual equities since the mid 90s. He has been a well known commentator in the financial blogosphere for the past 5 years, following a career in corpoporate finance and accounting. Mark attended the University of Michigan where he graduated with a degree in Economics.

As an avid reader, Market Montage is the personal blogging site for Mark to share his views on economics, markets, and the like. Occasional cynicism and wit shall be deployed in his postings.

Follow Mark on Twitter @fundmyfund.

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