Tuesday, July 20, 2010
Bulls Try to Regain Control
The market's decline this morning and reversal in a smooth methodical manner is not at all what I'd expect to see in a 3rd wave at various degrees. I'd expect to see a sharp and quick rally at best. Internals were sold today with volume just getting above the 13 day moving average so today wasn't really a fluke it appears.
That crappy consolidating pattern after a sharp decline has come to haunt us again as we again get a sharp rally when the choppy gring lower ends (I talked about this in last Friday's post here). The sharp selloff and then complete reversal in a 5 wave rally is concerning for the bears here. So the evidence for the bullish case is building. Although all is not lost for the bears since the bulls have not taken out any key levels and plus it's possible the 5 wave rally is a C wave at some degree, which would explain the strong internals accompanying the move. It may just be a last effort to suck in the rest of the bulls before a big swoosh downward tomorrow or Thursday. If so, the rally from today should be near complete and will lead to a very sharp decline to new lows as long as it doesn't rally above 1100 first.
Looking at the daily candlesticks of the S&P the past few days you sure wouldn't expect that a wave (iii) of 3 of  or C was underway would you? I mean you have a bunch of green candles and one big red candle, and that red candle was done on a whacky options expiration day no less. Not encouraging for the bears. Also, today's bullish reversal made a nice bullish reversal candlestick that suggests higher levels in the coming days.
But as I stated above, the 5 wave rally could just be part of a C wave correction meaning that today's rally will be completely reversed soon and that today's bullish reversal was just the market's way of suckering the rest of the bulls into this market before it falls hard again this week. So although the evidence on the surface that was left today suggests that the bulls are in control now, it would only take a nice down day tomorrow or Thursday to reverse the bullish implications of today's move.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.