Stocks have been on a wild ride the past two days.  Monday was a holiday but Globex was open. In the chart below I circled Monday’s bar is circled, the narrow range and inside day gave a breakout setup for Tuesday.  Monday night’s trade saw an attempt at a downside breakout, this stalled out around the recent lows (877 to 875).  As the selloff petered out buyers came in; by the time the stock market opened yesterday a breakout rally was getting started.  The breakout setup gave the market the energy for yesterday’s strong advance.

As I’ve often commented, breakout moves often reverse themselves the following day; today’s action in stocks was a good example.  Corroborating this was momentum, which got pushed to short sale levels yesterday. They were able to hang around yesterday’s high early on, but selling pressure intensified during the day, leading to a selloff.  I showed the Fibonacci retracement levels on the chart to give an idea for profit targets.

Going forward, the S&P chart looks bearish.MACD is bearish; in addition, May shows three higher lows along with the double bottom around 875.  Failure to hold 875 opens the door for a larger decline.Should we be looking to follow that old trading maxim “sell in May and go away?”

Breakout rally, then a selloff

Breakout rally, then a selloff Looking at S&Ps

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