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Wednesday, June 26, 2013

Daily update 6/26

Most over sold lows are made when the shorts cover.  There is usually some panic buying when that happens.  The last two days has SPX up considerably off the low, but I don't think we had the typical rush of buying.  I have seen times in the past where the over sold buy signal just bounces for 2-3 days and rolls over again.  I don't know if that is going to be the case here or whether the market will continue up and cause the short squeeze to happen from higher levels.  Here is the daily SPX chart.

This was the second day after the buy signal and a second day of declining volume.  Both days started with big gaps up and ended with the futures within a couple of points of the 9:30 open.  The big gap ups do not seem to be scaring the shorts.  Here is the chart with the last two buy signals (green arrows) from late last year.

After both buy signals there was a relatively big green volume bar which I circled.  Note the wide range day on the second day off the Nov. low and first day off the Dec. low.  That is normal for this oversold condition as shorts cover.  We have not had the wide range bar or the increase in volume yet.  Is it yet to come or is the market going to roll over and retest the low?  I don't have a clue.  If SPX gets to the 50 SMA in this same lazy manner without a panic short squeeze it may roll over.


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