By: Elliot Turner
So today the market finally followed-through on last Friday’s reversal day. We had gapped up the other day, but had been unable to put together any lasting intraday strength. Today many commodity stocks took out their first resistance levels and now have a little more room. I will be watching the market as it approaches the 38.2% retracement level from the January highs to last Friday’s lows–approximately $108.60 on the SPYs.
Surprisingly however, market volume failed to match yesterday’s snowday levels. Is this demonstrative of a lack of conviction to the upside or should this be taken as a bullish sign that the sellers have been worn out for the time being? Rob Hanna over at Quantifiable Edge has an interesting take, arguing that “in basically every instance where the market was coming off a strong pullback, technicians could’ve complained about the volume.” Here is a chart borrowed from his post:
We are at one of those junctures where just about every day is a pivotal one. We now have a much clearer idea as to the important levels both above and below the market. Until we break decisively one way or the other, the trading will remain challenging and choppy. A key tell intraday that the market would move rally today came when HYG traded through Friday’s lows, failed to hold at that level and subsequently pushed higher. The intraday reversal was a good tell that the market would breakout of the pre-11:00 congestion to the upside. Today’s doji day provides good levels in both directions to use as a gauge for risk sentiment in the market. Be patient and wait for signals. Those trying to anticipate the next move are getting hurt right now.
