Wednesday the bounce held into the close and some relief from the selling. Gap open, drift lower and then the gradual buying started at 1 pm and followed through the balance of the day. We managed to close at the high from Tuesday. We establish 1867 as the near term low for the S&P 500 index. The oversold bounce produced a 3.95% gain on the day and all is well… until tomorrow.
On Wednesday the S&P 500 index gained more than 3.9%. The Dow was up 3.9% as well. NASDAQ rose 4.2%. Russell 2000 was up 2.4%. Bounce or reversal? I say let it play out and the patterns develop near term. The inside trading on most of the indexes sets the market up for a decision day potentially today. We will see how this unfolds and we will remain patient for now. There is no need to feel like you have to capture the low on a reversal and there is no reason to believe the selling is done… thus the need for patience.
Gold (GLD) fell 1.3% again on Wednesday, silver (SLV) also fell 3.1% and broke support at $13.80 (it did leave a doji candle on the day?), crude oil (USO) rose 0.3%, agriculture (DBA) was down 0.4%, base metals (DBB) fell 1.5%, and the dollar jumped 1.2% after a similar gain on Tuesday.
The market tallying by sector for the current trends for the ten sectors for S&P 500 index. No change to the upside bounce on Wednesday. The tally stands at nine downside, zero upside and one sideways trend. This clearly puts the downtrend in play short term or the sellers have control of the direction despite the Wednesday bounce. Watching how this all plays out, but still plenty of issues manage as we go forward.
Global markets followed the US with a bounce. Europe (IEV) was higher by 1.6%. China (FXI) gained 2.2% as follow up to the rate cuts restored some confidence. Emerging Markets (EEM) were up 3.3% with an inside day. Japan (EWJ) was up 3.9%. The global markets did show some positive moves off the lows, but this is where most of the concern is going forward relative to the economic picture. Watching.
Running the scans shows the daily leaders were semiconductors, technology, short gold miners, financials, small caps, emerging markets, short treasury bonds, and biotech. Much better leadership on Wednesday and if it can find some footing to follow through this would get interesting short term. It will take more than what transpired Wednesday to change the outlook near term… patience as we let this all unfold.
We remain mostly in cash with the cliff dive lower hitting stops. We posted short opportunities in the trading notes for those willing to accept the higher level of risk which played out well. Hit against some stops on the Wednesday, but we will monitor how the direction plays out near term. Remain focused with a disciplined approach as it takes the guessing out of the equation and allows you to implement based on what is happening and managing the risk of the markets currently.
Thursday is a day for follow through or resumption of the selling. Thus, we will call it transition day. There are no guarantees on the direction either way. Patience and strategy are key on how you approach the markets going forward. Trends are not apparent yet and that is the reason for the short term view of the any trades for now. Taking it one day at a time.