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Bottom Of Range Successfully Tested
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This morning, the market rallied up nearly 150 points but it was pretty obvious that the lower end of this trading range we have been discussing for weeks was going to be tested. The market quickly reversed and was sold off hard, nearly 500 points on the DOW intra-day. Many of the broad market indices breached their October 10 lows, alebeit on dramatically lighter volume. The S&P 500, NYSE, and the Nasdaq violated these levels while the DOW did not. The stops out there were gunned for and pushed the S&P down 22 points below the Oct lows before major support came in. The S&P rocketed out of the the 818 level with a vengeance to close at 911, almost 100 points higher.
Now, we have a successful triple bottom in place with a very bullish candle today on the charts. We can say with a great level of confidence that the October 10 low is a low of strong significance. A close below today's lows would invalidate this scenario but the odds of this are slim. Did you all notice how bearish the actual sentiment in this market was; everywhere I look, I hear about armageddon. There is extreme arrogance in the commentary from the bears. Every rally is a bear market rally in their views, and it was, up until TODAY. The market has completed a multi-week basing period with a pattern of lower volume on each successive move lower. I spoke with alot of traders over the past week who have capitulated in the past week and I saw alot less bottom picking on the message boards I visit and a lot more calls for Dow 6000 and below.
Let's take a look at the S&P 500 chart to see a clear view of what I am talking about. Look at the gigantic range we have been trading within over the past 6 weeks. The sentiment has been getting increasingly bearish as we progressed through this range and this is why the ensuing rally will have more legs than most will believe. I still believe that 1130 to 1200 is in the cards over the next few months.
The banking sector took it on the chin over the past week; however, UYG appears to have finally put in a low of significance as well. There is a major falling wedge formation setting up here. I am now watching for a break through 9.50 to signal a breakout through the wedge.
Now, we have a successful triple bottom in place with a very bullish candle today on the charts. We can say with a great level of confidence that the October 10 low is a low of strong significance. A close below today's lows would invalidate this scenario but the odds of this are slim. Did you all notice how bearish the actual sentiment in this market was; everywhere I look, I hear about armageddon. There is extreme arrogance in the commentary from the bears. Every rally is a bear market rally in their views, and it was, up until TODAY. The market has completed a multi-week basing period with a pattern of lower volume on each successive move lower. I spoke with alot of traders over the past week who have capitulated in the past week and I saw alot less bottom picking on the message boards I visit and a lot more calls for Dow 6000 and below.
Let's take a look at the S&P 500 chart to see a clear view of what I am talking about. Look at the gigantic range we have been trading within over the past 6 weeks. The sentiment has been getting increasingly bearish as we progressed through this range and this is why the ensuing rally will have more legs than most will believe. I still believe that 1130 to 1200 is in the cards over the next few months.
The banking sector took it on the chin over the past week; however, UYG appears to have finally put in a low of significance as well. There is a major falling wedge formation setting up here. I am now watching for a break through 9.50 to signal a breakout through the wedge.
