Yesterday's ugly selloff, following news of a big federal rate cut, was completely erased by today's solid gains and a followthrough day, but on lower volume. Although it is not yet entirely clear if this current selloff is over, today's price action showed some bullish signs that should have the average trader leaning towards the bull side.
SPY on the 30m Timeframe is currently in an uptrend. Today we clearly held above the Anchored VWAP from Friday's lows (Cyan Line) and the 5DMA. These are all productive clues to raise a bullish case. Interestingly, we are currently right at the 50% Fibonacci retracement from the all time highs to Friday's lows. Tomorrow, if SPY cannot break today's highs and breaks below the up sloping trendline, the short term trend turns neutral which is a cause for caution.
Currently, I am in small long positions as the short term price action looks bullish so far. We are now entering a critical moment in this bounce. All market bottoms end with at least one followthrough day and the most powerful followthrough days occur within Day 4 through 7 after the bottom was made. Tomorrow will be Day 4.
SPY on the 30m Timeframe is currently in an uptrend. Today we clearly held above the Anchored VWAP from Friday's lows (Cyan Line) and the 5DMA. These are all productive clues to raise a bullish case. Interestingly, we are currently right at the 50% Fibonacci retracement from the all time highs to Friday's lows. Tomorrow, if SPY cannot break today's highs and breaks below the up sloping trendline, the short term trend turns neutral which is a cause for caution.
Currently, I am in small long positions as the short term price action looks bullish so far. We are now entering a critical moment in this bounce. All market bottoms end with at least one followthrough day and the most powerful followthrough days occur within Day 4 through 7 after the bottom was made. Tomorrow will be Day 4.
Comment:
Once again, IWM continues being the laggard index. Although IWM showed the same productive price action as SPY and QQQ, this reaction bounce is weak and IWM is still below some major lines of resistance (Anchored VWAP from December 2018 lows and 200DMA). Furthermore, the 38.2% Fibonacci retracement aligns with this anchored VWAP level which we are still below. Going forward, 153.50-154 is going to be a critical area to clear for a strong bullish case. Otherwise I would not want to be long IWM at this time.
Comment:
QQQ shows the same bullish price action as SPY, however SPY outperformed QQQ today by 0.10%. Unlike SPY, QQQ currently has no clear levels of resistance until the 50DMA where we might find trouble. We are currently right at the 50% Fibonacci retracement.
Comment:
Overall I plan to take small bites in this market on the bull side. I would not fully commit to aggressive longs just yet. We have still yet to confirm the bottom in the form of multiple followthrough days and the volatility in this market environment remains high.