Subj : Market Action To : All From : Paul Rogers Date : Fri Apr 23 2004 06:11 pm


The market struggled today.  This morning it fell, and fought its way
back this afternoon.  Volume sank to -4% below average.

To me this seems to confirm the idea that yesterday's action included a
lot of short-covering.

When an Bear decides to cover, he buys just the amount he needs to
replace the "borrowd stock".  He's getting out of a dangerous position.
If prices go against him as he fears, there is no limit how far up they
could go, but they can only go down to zero.  He isn't primarily
concerned about the price he has to pay.  He'll pay up for the stock he
needs, driving prices higher, AND precipitating other shorts to cover as
well because prices are rising.  It becomes a "feeding frenzy", and when
it's over it's over.  He won't buy more than he needs, having that, he
quits.  The typical short-covering rally is very short and sharp.  On
the other hand, when Bulls are buying, they're going to continue buying
because they've got conviction.  They have in mind a price range they're
willing to pay, especially a price they consider "cheap".  This is what
creates "support levels".

Now, if the Bear was right, and the mood of the market has shifted, he
may switch sides.  But not immediately.  Having saved himself from his
previous dangerous position, he has to evaluate his next move.  This is
why technicians will be looking for a confirmation of the move over the
next week or two.  If it fails to appear, then it's chalked up to a
"short squeeze".

 Price     Vola-     Momen-    Volume    Oscil-    Summ.
 Change    tility    tum                 lator     Index
 -__+      -__+      -__+      -__+      -__+      -__+

 __>_      __|_      __|_      _>__      _>__      __<_     04/19
 |___      __<_      _|__      __|_      >___      __<_     04/20
 __<_      _<__      _|__      __>_      |___      __<_     04/21
 ___|      _<__      __|_      ___>      _|__      __<_     04/22
 __>_      _<__      __|_      _>__      _>__      __<_     04/23

Timing Signals:  I don't use or recommend timing signals, but they're
fun to watch.  If I did though, well, I might use something like this.
(Be warned!!  It tends to whipsaw around signal points!)

Last Signal: BUY        Date:  04/22/04 S&P:    1140
Winner or Loser:  tbd                   By:     tbd

See my market tracking charts for '02-'03 and my investment strategy
study at my website(s):
http://www.xprt.net/~pgrogers/Pers.html
http://www.angelfire.com/or/paulrogers/Pers.html
http://www.geocities.com/paulgrogers/Pers.html

Paul Rogers, paul.rogers@angelfire.com -o) http://www.angelfire.com/or/paulrogers /\\ Rogers' Second Law: Everything you do communicates. _\_V .... He died to take away your sins, not your mind. ___ MultiMail/MS-DOS v0.35 --- * Origin: The Bare Bones BBS (1:105/360) .