We had one heck of a turnaround today. What started off as a romp in the park for the bulls turned into an all out rout of the bulls. Even worse, the selling came on the highest volume in about 3 weeks. But despite some worrisome technical damage I'm hesitant to read too much into today's action. I think that a lot of what happened today was largely due to people jockeying for position post-vacation.
The Nasdaq shows why so many of us watch the 200-day moving average so closely. Yesterday I pointed out the holes in the wall right at the 200 DMA. Selling kicked in today once the Nasdaq got to its 200-day moving average. Coincidence? The selling was so bad on the Nasdaq that it not only closed this morning's gap but it went on to make a bearish engulfing candle. It's not too often that you see a dark candle engulfing another relatively long dark candle.
We had the same gap & crap play out on the S&P 500 but of course the gap up isn't shown on the SPX chart below. (Check SPY's chart to see the true open & gap.)
Oil certainly played a big part in today's reversal as it sold off early and then rallied back toward its 200-day moving average.
No changes
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Down | Down | Up |
| Intermediate | Up | Up | Up |
| Short-term | Down | Lat | Up |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
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