With that said, I’m not calling my suggestion yesterday outlandish just yet. One day does not make a trend, and the volume today although better is still much lower than the down days over the past few weeks signifying that there is not full support by all parties quite yet.
News driven bounces many times can fizzle, and given that most participants were short going in to today … we could have had nothing more than a short squeeze. Although short squeeze’s certainly create a fast positive move, once all the shorts are out, there needs to be people buying on the long side in order to keep the momentum alive. If there isn’t, we will stall and eventually continue downward.
I am still sitting on the sidelines currently. Although today’s movement was widespread by most stocks, I need a little more reassurance than one day. If we get a strong follow through day tomorrow OR over the next few days (with accompanying volume), I will be back in the market. Of course, I don’t treat my entrance into the market as an all or nothing event … I will be wading in with smaller positions until I clearly see what we have in store.
This very possibly could be a bounce and not a true rally, but the bounce could EASILY go up 4 – 8% (up to the 50 day moving average for sure) before showing signs of weakness again. We have a lot of resistance to get through and until that is completed, we watch and possibly partake with some skepticism.
I leave you with a reminder that just a few weeks ago, we hit a short term bottom and had a very strong one day bounce (5/21/2012) which resulted in a 2.4% gain for the day in the Nasdaq. After that we slowly broke apart and dropped another 3%. Don’t get too excited for today just yet, I certainly like today’s action, but we need to continue with the same strength over the coming days and weeks in order to convince the big money to start moving back in.