I’ve written about stock futures twice in the past two days; there are lots of good things to pick up on in recent action. Let’s look at the S&Ps. (the chart for the NASDAQ and the Dow are very similar.)
As I’d written about earlier today, yesterday’s big selloff in stocks pushed momentum down to buy signal levels; as yesterday’s low started to hold, the buyers came in and the market rallied. This gave us what we anticipate on a momentum buy day-an early low followed by a rally during the session, with the market closing higher than where it opened. That was the case today as S&Ps closed about 16 point higher than the open.
Where does that leave us for tomorrow? The red line at 847.50 is a 50% retracement of the recent decline-from Friday’s high to the low of today. S&Ps (the Naz and Dow as well) are having trouble clearing this level, and an inability to clear it will most likely lead to a new decline. Momentum is back up high enough that it’s more bearish than bullish, although it’s early for a sell short signal.
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