After the last 2 + weeks of markets rallying back from an extreme oversold condition, it was certainly no surprise the indices experienced a slight pullback/retracement on Monday. The intraday patterns that developed saw pullback levels hold near minor support at the SPX 3860-63 and NDX 11,345 levels, but the indices did finish in the red to start the week.
The current technical state of the indices shows key next resistance overhead near SPX 3900 & NDX 11680, A price volume surge through those levels would indicate the markets intention to at least test higher levels short term, but the bigger picture tells a more bullish posture . A basic Wave analysis shows a possible completed 5 waves down to a typical selling climax. Although we’ve seen even deeper more oversold readings in the past the price patterns and technicals that formed signaled that a considerable buying opportunity likely existed at the lows on October 13th.
One of the most striking technical observations are the hundreds of stocks I track that appear to have formed distinct bottoming patterns over a period of weeks and months and have now started new up trends with a price volume thrust and are beginning to extend their moves higher.
Joe Granville once stated “The market climbs a wall of worry” and it certainly appears to be attempting to do that currently. We’ll be closely observing our indicators and technical patterns to get confirmation that the current action might be the “real deal” or just a strong snapback/ retracement in an ongoing bear market Stay tuned
“Trade what you see, not what you think.”
Harry Boxer, President & Founder