Since my intermediate-term bias is upwards oriented, I have to assume we have seen the bottom of this short correction. I will try to take advantage of the first opportunity to go long.
Usually, after a big move down like Friday's plunge the market oscillates for a few days before decisively moving up. Below are some examples of how daily bars looked at some other bottoms. I have noticed that usually there is a big move down after the first big rally off the lows.
SPX daily charts courtesy of SaxoBank. Click to enlarge
december 08 (the scenario I first thought
of after Friday's move)
november 09
february 10
june 10
july 10
As for the put/call ratio:
It has made a bearish spike (red arrow) despite a huge rally. This is a bullish development as it means shorts are confident enough not to cover and even to add to positions. This is what a move up needs!
Wedenesday outlook: I think both sides of the market can be played. I also would not be surprised by a big sell off in the last hour of trading.
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