It was really more than some, but the reason, I say that is because of the late surge in that index, which was very good to see. The Dow was up 220 points with the Nasdaq up 6 points. Not great, but the late action saw it run up over 30 points. That’s much better action. It outperformed the last 30 minutes. The last 30 minutes was the highest volume part of the day, and that was good to see. The thirst for pure froth was there, and without froth you have no rally. You need buying in the world of make believe to make sure you know you can trend higher. No make believe equals no follow-through, but we got the magic wand to raise the froth in the last 30 minutes. That’s a huge positive for the very short-term only.
If the market had closed up nearly three hundred on the Dow, and fifteen on the Nasdaq, that would be a massive red flag. The bears looked real good intraday when the Nasdaq was lagging so badly as they attacked the heavyweight of all heavyweight’s in Apple Inc. (AAPL). It tested down to its 50-day exponential moving average at 493. It also happens to be where there’s a strong gap at 394. It breached below both of those support levels when it tested 491, but that’s when it took back off to the up side. A huge save for the tech lovers. Apple’s recovery coincided with the big recovery on the Nasdaq. Bottom line is today may have put in a decent short-term bottom, but the bulls have a major headache in a huge gap at S&P 500 1166. If that can clear, the market can run some, but it won’t be easy. At least the bulls can feel like they accomplished something positive late in the day. It was good day for the bulls for sure.
It makes things interesting when you get the biggest laggard of them all looking more positive short-term. The banks look good in that they have some real strong positive divergences in many of their stocks. Citigroup (C) has a strong positive divergence with the stock putting in a nice gap up in the pattern today and closing basically on the highs. Full candle is a good thing when you gap up off a good divergence. As I checked around I noticed most of the financials have good positive divergences and now a gap up underneath them. It doesn’t guarantee them health beyond a short time from now. It just says that there is hope for a decent rally for a little while, and then we look again when things sell off. Whether they put in good oscillators or not on future selling will be of concern. For now, things are a little healthier technically in that world, and since it hasn’t happened too often, it’s a nice relief for many.
When studying the charts from Europe we can see that many of those charts are deeply compressed with selling pressure. The oscillators buried and flashing some positive divergences much like some we’re seeing here in the United States. It doesn’t guarantee a big up move, but it is encouraging if you’re a bull to see that because much of our futures each night are tied in to the action from Europe. We follow Germany quite a bit, and the set-up there is fairly bullish. Asia is also a bit hopeful as after a strong down move there were some nice hollow red candles last night. This too, after a strong move down such as they had, often signals a short-term reversal in fortune. Never a guarantee there either, but hollow red candles in Asia, along with positive divergences from oversold in Europe, is offering up the potential for a small rally here. Understand that bigger picture. There are no strong buy signals. These set-ups are potentially good for the very short-term, but say little about the bigger picture clearing up. That’s all about the fundamentals, and for now they remain quite negative. Let’s see if all these short-term signals can equal a small rally for our market.
Today didn’t flash wonderful news on the reversal from all parts of the market. That’s classic for a bear market. The semiconductors did poorly today. Many of the China stocks also did very poorly, although, hopefully, with the late rally they are trying to bottom. However, they lagged badly overall with some of them having quite a bad day from a price perspective. Even some of the reversals we saw in laggards throughout the market today weren’t exactly brilliant. You have to be very careful in markets such as these if you’re going to be taking on any long side action. You are playing counter trend to the bigger picture, thus, you want positive divergence charts as much as possible along with less frothy stocks. Many of those froth stocks were the ones not to recover today. Some did great, but some lagged very badly. So caution is the word on froth in a bear market. Don’t just buy a stock because of its name. Be very diligent in your stock picking. Some of the best names struggled today. Not a throw a dart reversal. You’ll have to work for your long side plays.
Massive resistance is at 1166 on the Nasdaq with 1114 and then 1101 acting as massive support. If the bulls can get through 1166 on the S&P 500 before losing 1114, that would be a near-term positive. Normally it’s very difficult to clear such a huge gap, but the bulls do have sentiment on their side along with the other short-term positives just discussed. The bull-bear spread has been inverted for the past two weeks, and my guess is, that when we get the numbers on Wednesday morning, you can make it three weeks. I’m guessing also that it will be the highest spread we’ve seen. Maybe this reality can help the bulls get through 1166. We shall see in the very near future, but until then keep things light.
Peace,
Jack
