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Monday, March 26, 2018

Daily update 3/26 The Good, the Bad, and The Ugly From the Market’s Retest of the February Low

Strong oversold bounce.

SPX made up more then it lost on Friday.  Breadth was +75%.  New highs were 23 while new lows were 186.  It is still a pretty good ways just to get back to the 20 SMA.

The futures rallied all night long.  There was a sell off after the open until Europe closed at 11:30.  Then it was up the rest of the day.  The futures ended up slightly back inside the channel.  If they do not reverse back outside over night this suggests a move up to contact the 20 SMA. 

The red count dropped considerably.  It is still near oversold.

The cartoon from Friday was appropriate.  Instead of testing the intraday Feb. low the market decided to bounce instead.  This is the more tricky scenario so it makes the most sense that is what the market would do.  There is more room for this bounce to carry higher even if the market is going to roll over and head back to the lows.  Is this a dead cat bounce or something more meaningful?  I don't see anything that gives me any hints on that.  There is another acceleration point from SPY options at 265.  We ended the day right around there.  More upside tomorrow could cause some more hedges taken off pushing the market higher.  Hedges being lifted on the 260 and 261 strikes probably helped the bulls considerably on the afternoon rally.  I wonder if a lot of option sellers are fuming a bit today.  The real screaming will come if the market falls back through those levels and they have to hedge again.  Investors have been selling volatility for years with no punishment.  Maybe the market is trying to make up for that.  The easy money in the market never lasts forever. 

News the U.S. was in negotiations about trade with China and that the U.S. had reached an agreement with S. Korea helped fuel the upside.  I have no idea how negotiations with China will go.  Is China actually going to agree to play nicer, or is this all lip service?  Unfortunately there is no way to know at this point.  We may get further headlines either good or bad.  It is clear that trade headlines are affecting the market.  Until all this gets settled better be careful.  The market might have more ups and downs to go.

Interesting article on how the retest is developing.  The Good, the Bad, and The Ugly From the Market’s Retest of the February Low


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.