Today is day 3 of the selloff. Usually after you get two straight days of strong selling and closing near the lows, you get a gap up. Not today. It is another gap down, albeit a small one. But I did notice that intraday yesterday, the Nasdaq was relatively stronger than the S&P. And overnight, the Nasdaq outperformed the S&P. This a good sign that the Nasdaq selling has reached temporary exhaustion. We can now play for an oversold bounce.
There is also strong support at ES 1834, which is also the low from 2 weeks ago, and equates to S&P 1840, which is an important support level. I expect us to bounce from this area at least for a day. I don't advise playing for these quick bounces, because the market appears to have just started a choppy downtrend. Unless you are willing to sit through a potential puke move that takes us to ES 1818, then don't go long here. The capitulation move is a possibility, but I am leaning heavily towards a V reversal today and a gap up for Wednesday. I already took a small long yesterday around ES 1843, and will add to my position around 1834.
In other markets, Treasuries look relatively weak, and have struggled to build on Friday and Monday's gains despite a lackluster overnight session for the S&P. Ahead of the FOMC minutes and 10 yr bond auction on Wednesday, I expect the selling to continue till then.
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2 comments:
Good call MO. After all that selling this rebound may have legs.
Thank you. I don't know how far this rebound will go. Probably not very far. I will not get greedy on the longs, I am looking to sell tomorrow morning, hopefully on a gap up.
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