is the sun finally starting to rise?
Today the market rose over 3%, and I like what I saw. In fact, today is the first day that the internals (after the close) are telling me to buy. You might say … of course dummy! … the market is up 3+% … of course things look rosey! But … last week we had two moves where the market went up over 4% where i was skeptical and in the following days the market tanked again.
In fact, For the past week we have been lightly building strength but it wasnt showing in the price, prices were getting weaker. Then, yesterday we tested the lows to see if the prices would hold … and fortunately they did. This was an important milestone. With that said, I still was not willing to get in the market overnight (yesterday) since although healing was occuring there wasnt much in the way of positive developments in the underlying internals that i study constantly.
Up until today, I was trading intraday and not willing to hold a position overnight. I almost did last night (wish i did!!), but still wasnt confident on the move.
Am I fully long at this point, absolutely not! We very well could test the lows again, but I do have more confidence after today that we have seen the bottom of this correction and it is only sideways or up from here.
Today’s strength showed up in most of my analysis, not just one or two indicators but most of them which obviously is good. In fact, the last time we even had close to this level of strong support in my analysis, happened to be the near the top of this decline … on 7/26/2010. So even though the market last week rallied over 4% on two occasions, those days did not show nearly the strength i see today.
At the close, we came up to and passed by pennies a few very important targets (moving averages and pivot points) which i expected to act as strong resistance and cause prices to stall and consolidate there. Yet, literally in the last 40 seconds of trading I was surprised to see that we passed my targets. And now, in after hours trading, we are pennies above it. If we can stay above this number overnight and ideally if we can close above them tomorrow, I would be very bullish at that point. For simplicity, if you want to track, the IWM needs to stay above 68.28.
So, where do we go from here?? Well tomorrow will be a very important day to see if there is follow through or a total slam down. If tomorrow is strong, then I expect to be very bullish over the next 3-5 days and longer if the strength continues, but if tomorrow is only slightly up, then I will grow cautious and most likely continue to buy, but plan on buying as the market falls down to retest the lows one more time.
Most of the buying today was from people covering their short positions, we need to get a few days of strength to encourage the general public to hop on board. Once that happens, I expect a very fast move up, but we may see downside before that happens of course. Bottom line, the market needs to stop the seesaw ride for a few days for people to become comfortable to invest most than a few hours.
