S & P 500 RALLY - OOPS THERE IT IS
Stock Market Rally - read all about it. I am sure some people will come in and say see we called it, a bottom. I will not be among those. I had been calling for a bounce as readers know but I was early, so as far as I am concerned I was wrong. We are getting the bounce now but I see it as a setup for an upcoming sell signal. The sharper and further this market rallies the better I like the sell signal. We got extremely over sold here and although timing a long down here is very tough, you can use oscillators effectively to exit shorts after moves like this. You can see the significant divergence in the one oscillator I have displayed above. I would not use this to buy but would use it to exit a short.
It is so enticing to study and try to find ways of buying these types of spike lows, please don't bother doing that. I can tell you as someone who has spent years trying to find a way of consistently buying these types of moves that it is impossible to time them precisely time and time again. IMPOSSIBLE. If anyone tells you they are doing it ask to see their account statements that prove they are doing it.
The way I trade once I get really sharp bars like this going, I prefer not to fade them until the momentum of them slows down some. I do miss some sharp abrupt trend resumption entries due to this but I have not been able to find a consistent way of trading these without seeing the momentum of them slow down first. We are nowhere near a slow down after today so there is nothing for me in the indexes for tomorrow.
Here is the SMH and how it has done during this huge two day turn around.
You can see that clearly this had been holding up much better than the ES above. We had barely made a new low in price compared to the ES having that huge drop. We then had much more divergence in this oscillator as well. We need to break out above this channel that we are in the middle of to signal that all is fine. I am looking for a sell signal up against that channel. Whether that will materialize or not it is too soon to tell. For now I think the long side is where to be on a short term basis and then we will see if we slow down after a bounce or just keep rolling.
This is all I have for tonight - Good Trading