The Elusive Turn Of The Quarter Rally

For the past few days we have seen fear and loathing at the open, after which traders stepped in trying to pick a bottom. When traders could not find takers for their merchandise they dumped into the close. This morning it looks like the market will gap up.

Traders will be very hesitant to chase a gap up as they have been burned too many times this week. The market does not like to make it easy to catch bottoms and if we gap up and never look back this market will have allowed very few traders to catch the bottom.

If the market continues its losing ways the bulls can look forward to the fact that the market will be maximum oversold by the end of the day on Tuesday, so there should only be three more days of pain before the short term risk/reward skews strongly in favor of the bulls.


Anonymous said...

The only problem I see with this thesis is..if there is going to be an end of the month rally, it will take place BEFORE the last day of the month(Wed) Both Thursday and Friday will be very light in volume.

I believe the markets are closed on the 5th.

Tsachy Mishal said...

The Turn Of The Month Rally and the maximum oversold reading are irrespective of each other. In my opinion maximum oversold is the much stronger signal.

The end of quarter strength is the reason I don't think we will reach maximum oversold but if we do I believe it will be a strong signal on its own plus there will be beginning of the month strength. The employment report next Friday is my worry because I believe it will be bad. Not sure what expectations are though.