You know things are bad when 3 to 4% losses feel like a victory for the bulls. Today was the type of day that many traders, myself included, like to see when the market’s trying to bottom. The market sold off extremely hard for most of the day and then we got a “snapper” rally in the last hour. The Dow jumped almost 400 points from 3:00 to 3:30. That type of rally can really get the bears on the defensive (buying), especially those who over-reached.

Speaking of over-reaching bears… I always like to watch my site’s referral logs on days like today and I was a little surprised at what I saw today. For most of the day my “inverse ETF” list got a lot of traffic. Usually when I see over 25% of my traffic going to that page it’s a good sign of a short-term bottom. I checked my logs around 3:00 and at that time 74% of my traffic was from people looking for inverse ETFs.

If you’re looking to initiate shorts with the indices down over 7% on the day you must think the market’s going to zero. So now we’ve got a situation where most of the people who initiated shorts during the day are losing money. They could become very motivated buyers if we get some follow-through on the late afternoon strength.

Given the action we had today it’s not surprising to see tons of hammers and other candlesticks with long, bottoming tails (wicks / shadows). Just look at how far below its lower Bolling Band the Nasdaq dropped today. Cramer clearly wasn’t the only one who capitulated today.

The S&P had similar price action to the Nasdaq but its volume surge wasn’t as impressive.

For what it’s worth, T2108 closed at 4.27 today.

Trend Table

No changes

Trend Nasdaq S&P 500 Russell 2000
Long-Term Down Down Down
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’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.