Another Bull Trap?

The Dow surged almost 150 points today seemingly on the Chinese stimulus package which the major wire gave credit to. This surge happened despite an amazing drop in payroll reported by the ADP employment report. And, this surge happened in a deep oversold condition. Which makes this "surge" little more than just a bull trap. In fact, looking at the market action, there is clear sign of profit taking by the final hour today. What I am trying to say is, don't get too excited. At least not yet. In fact, the bull trap will still be valid even if the Dow pulls up for a couple of days more. All strong downtrends are marked in between by multiple bull traps. Just look at the Dow's drop from 13000 to 11000 back in last May and you will see bull traps of up to 3 up days in between. So don't be fooled. Most amateurs get taken in by bull traps and always experience the market turning against them right the very next day they entered and then blame the market for being manipulated. Yeah right, there is like a dedicated group of people who work professionally against you alone? Nonsense. The problem is that amateurs tend to act too quickly and often get caught in bull traps. So, don't get caught in this one. This is also why I always recommend that if you MUST buy into this market, do so by buying call options sparingly using money that you expect to lose in order to limit losses. Otherwise, you could just go with the flow and buy put options on things like QQQQ and profit to downside all the same (again, sparingly with money you totally expect to lose).

Tomorrow's Jobless Claims and Friday's Job report is going to wipe out much of the enthusiasm and introduce much volatility to the market (see economic calendar). In fact, don't be surprised if the market actually rise some more into higher unemployment rate.