ETF Trading with Larry Connors: Bear Market Bounce or More Selling?
In spite of the two-day rally, the overall market is in neutral territory because it was so oversold after Wednesday’s sell-off. The 2-period RSI of our Country Fund ETF Universe and the Main ETF Universe are both in the 60s.
Friday closed poorly. Even though the averages held into the close, many underlying stocks, especially the ones most sensitive to the economy, closed near their lows for the day. Today will be a be a sign of whether this was a just two-day bear market bounce if the market resumes its sell-off. This will be especially true if no negative news comes in and the market just glides down.
The one good thing this market has going for it is an extremely high level of fear and -skepticism. VXX is near 5 month highs and nearly every financial newspaper ran lead stories this weekend on how investors can protect their money going forward. Some of the products and ideas are a bit bizarre (for example those mentioned in this article in Saturday’s New York Times [https://www.nytimes.com/2011/08/13/your-money/asset-allocation/investors-find-new-ways-to-strategize-amid-volatility.html?pagewanted=all]) but everyone is looking for protection and that’s a good sign.
This week will again be dominated by news from Europe. If the Obama administration or the Fed had any solid plans, they would have showed their hands last week. On Thursday (right after Wednesday’s major sell-off) President Obama was in Michigan promoting green technology; this is his administration’s solution to creating new jobs and spurring the long-term economy (I wish I was kidding).
The above is from Larry Connors’ Daily Battle Plan.
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Larry Connors is founder and CEO of TradingMarkets.com.