The market is in a bear market and is starting to fall very fast, but I still feel like looking for longs, playing a continuation of the bear market rally. This is not just gut feeling, of course. I have shown two indicators in my last post suggesting that the market has not been overbought and that the economy has some positive news to provide.
Back at the beginning of August I was thinking that the FOMC meeting will mark the end of the rally. The Fed has failed to deliver, indeed, but the market technicals are not aligned for a new downleg. I now think the market will be supported by the anticipation of some positive outcome in the European crisis over the next weeks. All until the first advance estimate of the Q3 GDP comes at the end of October - maybe we will get an answer as to whether the anticipated economic acceleration is taking place. I expect this event to mark the top of the bear market rally.
Meanwhile, I will start to go long next week, whenever conditions are favorable. In fact the first opportunity to go long presented itself on Friday but it would have been too risky to hold longs over the weekend.
Given the way the daily chart looks right now, a marginal brake of the August lows cannot be ruled out, before the move towards 1200 starts again. I personally do not have any clue to tell me if that will happen or not. I will leave it all to chance and let risk management do its job.
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