The Gilmo Report

December 17, 2017

December 17, 2017

Friday’s triple-witching options expiration saw the major market indexes make all-time highs on heavy, options-related volume. What perhaps fascinates me the most currently is the way many beaten-down leaders are recovering in v-shaped patterns. Some are even recovering to the point of retaking their old highs and forging new ones. In addition, where stocks haven’t broken down, there is some constructive basing action to be found.

Members know that when it comes to figuring out where the market is likely headed next, the action of individual stocks trumps all. A couple of weeks ago, the mass breakdown in tech, internet and growth leaders looked like a harbinger of doom for the general market.

The fact is that over the past few days, textbook shortable rallies have proven to be anything but, as v-shaped reversals and recoveries take hold. Some of these rallies were in fact shortable on the way up, and some were, at least for quick tactical short scalps. But after a small pullback from logical resistance, the bids began to form up again, and the stocks continued pushing higher.

But as I’ve discussed befor, this is an unusual QE-infused environment where one should be open to taking a two-sided view of stocks. When shorting into oversold reaction rallies in beaten-down leaders isn’t working, or only giving up quick short scalps, then that alone is critical visceral market information that can be used by nimble, flexible traders.

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