The indices recouped a small portion of yesterday's losses in a second day of very high volume trading. This morning I mentioned that the indices were stretched so far beneath their lower Bollinger Bands. That's a sign of a lot of weakness and an oversold condition -- both conditions could continue longer than bulls would like. I'm hard pressed to be an aggressive (short) seller on things that are below their lower bands. But one they bounce back to declining bands there's potential for a walk down those bands. I'll be watching those bands closely for potential entry points over the coming days.
The S&P 500 bounced just over half a percent to close right at resistance. Note that it stalled right at the lower Bollinger Band today:
The Nasdaq probed the bottom of the trading range it started back in November and bounced.
Like the S&P, the Dow stalled at its lower Bollinger Band. Unlike the other indices, it's oversold based on my stochastic settings and looks close to a buy signal.
The small caps continue to have good relative strength as the Russell 2000 holds near the top of its old trading range and near its 50-day moving average. It's also the only one of the aforementioned indices that's inside its Bollinger Bands.
No changes
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Up | Up | Up |
| Intermediate | Down | Down | Down |
| Short-term | Down | Down | Down |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
I went long ES and short NQ on the close today once this bounce looked sustainable but still very cautious hence the hedging. SPX would probably be a clear buy on my system if I modeled it. NDX has one of my indicators on a buy and the rest not there yet. So that is why the long-short combo which has a very small net long bias (adding beta = 0.05 to my portfolio!). My modeling shows an up-sideways trend for the next 4 days at least (my forecast horizon).
Are you getting bearish?
:-?