Real or Facade?

That was the (rhetorical) question I put to you in this post from Wednesday, Average True Range and the Market.

Although the post was mainly about characteristics of bear market rallies and how the ATR of this rally has collapsed in some cases by 50%, even though prices are higher, what I really wanted to revisit was this chart (there were a series of 3 for the major averages, only the Dow looks different in a bearish ascending wedge):

The point I was making is the collapse of the Average True Range which collapsed from around a range of 47 NASDAQ 100 points a day to less then 27, pointing out the gains have been smaller and the only thing they seem to be concerned about is closing the market green to influence sentiment, which is the point of a bear market rally.

In a secondary note I said, "the NASDAQ 100 is more typical of the market, what is immediately striking on this chart is the fact that there are virtually no pullbacks, any healthy rally sees pullbacks. This instead looks more like a short squeeze, the only problem is that NASDAQ short interest at last check was at 10 year lows. "


Well at last check the NYSE short interest has hit 4 year lows, this is no short squeeze rally.


If you didn't see the original ATR post, check it out when you have time.