The S&P 500 futures are up 75bps as of 9 am, and more importantly up ~3% from their overnight lows…..Most European indices have rebounded off of their worst levels with the DAX still down 1% on the day while Spain and France are now up on the day. The better than expected employment data just released can be explained as nothing more than a sigh of relief, even if only temporary.
I don’t have much to add about the actual data, but lets talk price action and what we think today will bring…..First and foremost, the market has to catch a little steam and fast or we will very clearly be back down on the day. The longer we get into a summer Friday without any upward momentum the greater the likelihood for things to get sloppy again.
Obviously I want to keep an eye on Gold as the rumor yesterday of greater margin requirements sent the commodity lower from an all time high on a day that was made for positive Gold performance….Further weakness in Gold along with equity market weakness would signal to me a further “risk off” environment as investors seek liquidity.
I am not sure this is the right place to jump in on the long side as I would rather wait for one more panic, possibly into today’s close as most investors may be cautious about being to long into the weekend. I would say though it is probably not a bad spot to start picking at things you want to own, lets say you want to buy 100 shares of AAPL for a position that you want to own through year end, well them maybe buy 1/4 now, 1/4 lower and maybe you end up buying the other half a little higher once it turns….i guess my point is, trade, don’t get yourself turned around by buying a full position and then have to make a decision 3 hours later when the market is down 3% of what to do……average into things and play small in markets like this…
I am hard pressed to see a V reversal like we saw in late June and this one may be more of one step up two steps back as we limp through the rest of the summer.
If you are looking for evedince of near term bottoms you want to look for formations like in the chart below, what some call a spike bottom in the Dax. (click the chart to make it bigger)
While the chart doesn’t show volume, I think it is safe to assume that this past week and a half’s down draft has been on fairly decent volume……and you want to see a big reversal day at the low like it appears that we see today….if the DAX can close on the high of the day, right around the previous days lows I think there is a very strong likelihood that this move would carry through till Monday on shear momentum from a very oversold condition.
All eyes will be on next weeks FOMC meeting and press reports about the possibility for more stimulus….these sorts of rumors can get a jittery market reversed especially from such a severe oversold condition like we are in now.
SO AS ALWAYS MOVE YOUR FEET, DON’T BE AFRAID TO CUT LOSSES, BUT ON A DAY LIKE TODAY BEING TOO IMPULSIVE COULD GET YOU IN TROUBLE, IF YOU HAVEN’T SOLD ALREADY THAN YOU SHOULD MOST DEFIANTLY WAIT FOR A BOUNCE IF YOU THINK THERE IS FURTHER DOWNSIDE.