Stocks are having a great day today. Should the bulls expect more rally? How can we know if it has made a bottom or not?
The daily chart for the eMini S&P futures is below. Panic set in last week as they dropped under the last two lows from May 25 and June 8. There were three days with a narrow trading range, then a big range rally yesterday. Note that there was a successful test of the low of the move, then yesterday’s rally stopped at a trend line resistance.
click to enlarge
By the Taylor Trading Technique today was a Sell day (read about the TTT here). On a Sell day we look for a resumption of the rally from the previous (Buy) day, with the Buy day high as the objective for a rally. So for today we were looking for the rally to take the market to reach at least 1038.50.
The rally continued, taking out the two old lows and Fibonacci retracement resistance at 1041.25. Closing up here would take some of the pressure off and start to turn sentiment more bullish.
Tomorrow could prove to be an important day for the recent rally. By the TTT tomorrow is the Sell Short day in the cycle, so we should expect a down move. The rate of change indicator corroborates, giving a short sale signal. The key price level I’ll be watching is the old low area around 1040. Holding there makes the break late last week a fake out, with higher prices likely after a correction. On the upside, 1066 is a 50% retracement of the selloff from the June 21 high, so this will be both a rally objective and resistance.
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
