Yesterday’s big up day gave the markets a temporary boost and seemed to calm everyone down a bit. The bulls were snorting again and the bears were amazingly quiet. Clearly, the bears were playing hooky… but, where did they go and why?
Well, a look at the charts of the major index funds (SPDR S&P 500 SPY, Powershares QQQ’s QQQ, SPDR Dow Jones Industrials DIA, and ishares Russell 2000 IWM), appears to show the bearish set up, and just how dangerous taking the bait can be. The bulls are hoping that the double reversal turns into a backtest of the recent downtrend line, and that increased volatility is a sign of an impending turn. But, unless today reverses course (again), the bulls spin game is over. And, as per usual, when the bulls stop snorting, buying opportunities emerge – could be coming sooner than later. Look for support in and around the March lows on the SPY (125-126 area).
Since the late April closing highs, high beta stocks have been hit the hardest. This is indicative by the fact that the Nasdaq 100 proxy Power QQQ’s and the ishares Russell 2000 index fund (IWM) have been hit the hardest. The IWM did sport a long full body candlestick yesterday, which could be a hint that it will demonstrate relative strength over the coming days when, and if a rally arrives.
Previously published as a blog by Minyanville.
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