Well that was fun. 13.5% in just 4 days. I had been waiting for some sort of a rally, but had no idea when it would come. I managed to get in on some JP Morgan calls near the bottom and more than doubled it - before watching it scoot even higher, of course. But a double in less than 3 days is okay in my books. No complaining here. What now?
I'm leaning toward another new low before we see a multi-month rally take hold. But I thought this rally would die out sooner than it has, so I could be wrong. The one thing I do feel strongly about is that 666 was not "the" low. Whether it was a low for this specific downleg is likely something that will be resolved next week. Any further follow-through would probably be a sign that I am wrong, and that multi-month rally is now taking root. I'm not going to chase it. I want two things to occur before I would think about buying anything: 1) enough time to elapse to consider the rally "accepted" and 2) a decent pullback that would give me a low-risk entry. Buying now would be suicidal because there is no legitimate way to control your risk. I'd rather watch the markets skyrocket higher for weeks on end and wait for a short opportunity than try to chase 'em higher. Shorting now is equally as dangerous. I would only do it if I had a multitude of reasons and an extremely tight stop.
On the S&P 500, I was looking at the 20day EMA to hold the rally on a closing basis. But Thursday's and Friday's close surpassed it. Does it have the juice to make it to the 50 (800)?
My two favourite indicators are not quite as ambiguous. The put/call ratio moving average is back to where it was prior to both the January and February highs (which is a sign of excessive optimism). The market breadth moving average is nearing the area that has previously marked intermediate term tops.
The US Dollar looks like it wants to retrace a little bit before making any further gains. My eye is on the 85 level for the Dollar index, 0.80 or 0.82 for the Canadian Dollar and 1.325 for the Euro.
Just a reminder to readers that these technical updates are for people with time horizons of under 3 months. DO NOT use this information as any part of a long-term investment decision making process.
Are there any indicators my readers would like me to include in these updates? What are your eyes on? Feel free to leave a comment below or send me an email with your thoughts.
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