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Market Recap: Huge Short Covering Rally Pre-Fed

October 28, 2008 4:11 PM

Well I mentioned that the market tends to have a positive bias before the Fed meeting because the trade is one sided as a general rule - no shorts. Today was no exception. It very much took me by surprise as we had no firm intraday low. What i did not notice is that the SP briefly went negative. Once that happened and it became obvious that it was going to close above the open and shorts began to cover. Once we cleared Friday’s highs I said ” I guess we are going to 8800 maybe higher” as there was nothing left to stop it.My bad as i simply saw no indication of this happening on an intraday basis - at all. It was simply buying above the low and see how it played out, basically.

These moves with no firm intraday lows are very difficult to say the least. There was no warning of a low that I could see. I should have just listened to my own instinct that shorts would not take out the Dow low before the Fed meeting. It was just very unlikely.

Anyhow it was a frustrating day as I was wiating for a firm low and didn’t get it. I should have just went “blind” long above the Dow low and waited it out. As this is basically what happened apparently. I am not sure where we are headed next. These Fed days become impossible to predict as huge moves can happen because of short covering and very little, if any, indication.

Written by Tom@StockBlade.com · Filed Under General Investing/Trading Commentary 

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