The Endangered Species

The rare bird, better known as the intra day reversal, was nowhere to be found today. Recent bottoms have not been of the whoosh variety but rather a cessation of downward momentum followed by attempts higher by the market.

I think expectations regarding economic reports are about as bad as it gets and it will be difficult to negatively surprise investors at this point. The market is oversold and sentiment is very negative. I believe it is best to buy under these conditions even though it is difficult. I don't believe the market pays people to be comfortable.

I do have my reservations which include the fact that we are not oversold on an intermediate term basis, the economy is getting worse and we are at the time of the year when bad things are known to happen. That said, I think at this point the risk/reward favors the upside for the next few days and possibly into Labor Day.


CP said...

I agree. Seeing "Hindenburg Omen" articles in the WSJ and getting bearish predictions from all my sales coverage makes me more bullish for a trade.

Chaos! said...

I agree we must be close cause everbody's on the same side of the boat, buy are you concerned that the 10 day A/D had to get below minus 700 to have a meaningful rally the last few selloffs? We're around minus 500 after today's action.

Tsachy Mishal said...

It is currently at -458 after today. It is more about what numbers are being dropped and we are dropping negative numbers for the coming 3 days. 8 of the past 11 days were negative.

We are not as oversold as we were at the early July low but that was pretty rare. If I recall we were down over 120 S&P points in ten trading days. At todays lows we were down nearly 80 points in from the top 11 trading days ago.

The most important thing is that a sufficient amount of time has passed so that everybody could get bearish and act on that bearishness. 11 days of mostly down is adequate time.