The Last Person
On Wednesday, the Nasdaq gapped lower but quickly found its
low. It then rallied nicely throughout the morning. Then, after some mid-day
drifting, it accelerated in its rally.
The S&P (and the Dow) also had the mother-of-all
reversals.
Based on the above, the fear of mutual fund redemption
(funds sell late in the day if they have to raise cash) did not come true. I
would guess that this (lack of selling) is what helped lead the indices into the
close.
The VIX also had the mother-of-all reversals. This action
puts it back within the 10% “stretched” parameter (see recent
commentaries for more details on this). However, it still looks like it has a
ways to go based on relative highs.
So what do we do? Well, if this is the “real
deal”* we should have PLENTY enough time to get long. For now, I’m in the
wait-and-see camp. In other words, I will be the last person to call a bottom
(and if you are a momentum player, then so should you be). If the market
shows signs of stalling, then we will have numerous shorts setting up. If the
market continues to rally sharply, then we will see transistional setups (First
Thursts, Bow Ties etc..) on the first pullback.
No setups tonight due to the severe reversal in the market.
Wait to see how things will play out.
Best of luck with
your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*And quite frankly, I hope it is. I really don’t
care what direction the arrow points. In fact, I have a utility that
“flips” my screen (so I can view downtrends as uptrends and vise
versa). This keeps me from becoming too biased.