Time for a Short Covering Rally in Stocks?

The market remains oversold with the cumulative RSI of the past two days on the Country Fund ETF Universe showing a reading of under 18. The worldwide downward pressure on stock prices is coming not only from the debt situation from Europe, but also from an accelerated slowdown in China. There’s obviously government intervention happening in multiple parts of the world and in the past two weeks, it’s done little to stem the tide of selling.

The next two days will be interesting. Volume will be light because of the holiday and the opportunity to create a substantial short covering rally is there. If it doesn’t materialize, it’s a sign that the selling pressure is too strong and the demand for cash outweighs intervention. It’s times like this that the 200-day ma is appreciated and even though the Daily Battle Plan Model Portfolio is long a few positions (with two positions offset with options), most portfolios being guided by The Machine are in high cash positions, combined with being dollar neutral hedged. It’s a far safer way to manage your money, especially now.

The above is from Larry Connors’ Daily Battle Plan.

To learn more about the Daily Battle Plan, click here for more information.

Larry Connors is founder of TradingMarkets.com