Here are some thoughts:
I believe we were in the vicinity of a good low; I believe Friday was a weak low.
Look at the candles Thursday and Friday. Gap down market on Thursday and the dip is bought. Bulls do not learn the lesson the first time? Okay, so gap it down on Friday again, and the dip is bought. But NO gaps have been filled for Thurday and Friday. AND the shadow on the Friday hammer points downtown.
This is different than prior bottoms. It is being more heavily bought by dippers IMO. I want to file this observation away.
The volatility measures showed no fear -- no upper bollinger test. In fact, VXN and QQV were negative with the market down.
On the other hand, P/C is creeping up and puttin heads are building a floor. Bottom indicators are forming nicely but still some time remains if the market wants to take the time.
So at some point this week, I think the lows will be retested and even exceeded to the downside. I suspect it will be earlier in the week rather than later because sentiment indicators I follow suggest the low was too heavily bought by bulls who are looking for a lay up and there was not enough fear in those buys. Maybe even take out the 1842 holy grail to shake and bake these faithful.
If I am wrong and the lows are not retested or exceeded during the week, I have my doubts about the sustainability and strength of any rally. A good low takes time.
I do not think I will short here in the making of this bottom. The week has bullish potential. I am looking for opportunity to go long but will be patient as bulls have been way too eager to buy anything at the slightest decline this time around.
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