DrBob*TA Update 1/23
The market made a huge bullish reversal today, as the Dow had been down over 300 pts, only to reverse in the last couple of hours, to close up about 300 pts.
The Spx tested yesterday's low of 1274 and took it out intra-day by going as low as 1270, then it too reversed impressively, to close at the highs of the day.
The volume was huge on the NYSE, 7B shares, with a/d of 11/4 and u/d vol 5/2, while the Nasdaq which had been relatively weaker, had a/d of 17/11 and u/d vol of 4/3, on heavy volume of 3.5B shares.
Today's action, in conjunction with yesterday's session, probably constitutes a capitulation even though today did not meet the requirements for a selling climax such as the 90% rule (which was reached yesterday at the opening).
I see Spx ST moving averages at 1365, 1380 and a very important one at 1405, while the 50 dma is at 1480 (it had been at 1490 along with it being a pivot point from support/resistance levels previously) and dropping, and will likely provide stronger resistance.
The NYSE McOsi reading had given a signal for a big move this week and it occurred today.
Overnight Asian mkts and tomorrow morning's European markets should rally hard from our mkts today and there is a chance of a strong opening tomorrow morning.
Short-sellers will be covering more of their positions tomorrow as the large institutions that short need days to cover, not hours.
Thus, we may have finally reached a tradeable bottom as the markets overshoot to washout sellers to reset the supply/demand balance.
The daily stochastics have crossed up while the MACD has not but its fast average has flattened out at least and the McClellan Oscillators are greatly improved.
If this market has changed trend for the time being, then the range of trading should be higher tomorrow and a firm close should occur, with positive internals regardless of the Dow being up or down.
jmho,
drbob
We won't know for sure until tomorrow and the next several days. As IBD states, you need a follow-through 4 days subsequent to the initial rally/reversal day to confirm it.
Leadership is needed and if the leadership sectors are manifest, then it will increase the odds of a technical rally lasting weeks, not hours or just a few days.
Perhaps the exchanges such as CME and ICE will resume their leadership roles, along with agriculture, such as MOS CF MON POT, along with select energy stocks such as PBG PMG SU ATW TTES RRC, along with solar stocks such as FSLR SPWR STP, along with tech stocks such as BIDU RIMM, along with biotech stocks such as ISRG, and if so, then this market can surprise some bears.
There has been massive selling the past few weeks and few days, thus possibly washing out many sellers for the time being, and so many are sitting on lots of cash or bonds right now.
Bonds are extremely overbought and parabolic and moneys could be rotated out of bonds and into stocks if the psychology of panic selling changes.
For the time being, the jury is out until we get confirmation of today's rally and reversal, but odds might favor the long side in the short term.
Watch for improved internals daily and intra-day, and firmer closes, and for leadership sectors and stocks to show up again and if they do, then bulls might get the upper hand for a change.
