The wild volatility continued today and yesterday’s internal divergence finally paid off today. The future again looked abysmal until rumor of a short ban in Europe was rumored and strength in the technology sector from last night’s CSCO earning kicked in. The big risk is holding overnight or the weekend. Everyone is worried about the next big news out of Europe. There are still many unknowns. The big pullback in the last 10 minutes of trading was probably traders avoiding overnight risk and hedging which could be bullish if nothing blows up tomorrow and over the weekend. Who wants to face a France downgrade after the Friday close?
The volume was light today. Classical technical analyst would call a bounce into a strong technical resistance area on lower volume as a short setup. I read an interesting comment that during the capitulatory drops the volume spikes higher due to liquidation. When the volume subsides, it could mean that the sellers are exhausted. Just another perspective to consider. This could setup an excellent intermediate short opportunity, if you recall the last USA shorting ban, in the coming weeks.
