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MARKET WRAP UP 09/01/10
With the stage set for a significant breakdown headed into a seasonally bearish period for the markets, the S&P 500 naturally rallied 2.95% to finish at 1080. Breadth was the strongest that we have seen in at least several weeks, while volume was surprising potent. Regardless if we continue to move in a straight line higher from here, or if we consolidate for a few days, the bottom end of the multi-month trading range has once again proven to have been a sound buying opportunity in the face of pervasive negative sentiment. With many traders complacently assuming that the market had started a fresh downtrend, the price action today reminds us that we have been in an oscillating market, rather than a trending one, for at least the past three months. Until we see a convincing break–and hold–of the range, it lives on.
As the updated and annotated daily chart of the S&P 500 indicates below, we have quickly rallied up to the 20 and 50 day moving averages on very strong volume. A break of those moving averages leaves us with a nice vacuum to fill above.
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Turning to other key indices and sectors, the common theme is that of powerful buying at crucial support levels.
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After several weeks of seeing any bounce, whatsoever, aggressively faded, the rally today had impressive staying power. Do not discount this change in sentiment going forward. While many will look to reload shorts in the next day or two, this rally could easily last longer than anyone thinks possible. For the past few days, the market has been looking for an excuse to rally. Off of economic data last night and this morning, we found those excuses. Going forward, if risk appetite remains healthy, I expect that change in sentiment to trump all economic data, good or bad.
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[youtube:http://www.youtube.com/watch?v=QR4Y6Ll0DwA&a=GxdCwVVULXcOXl33RxUOaQ3vM3IrhPiv&playnext=1 450 300]r
Awesome write-up as usual chess.
Your insights are always helpful!
Thanks so much!
Hey Chess. Take a look at Semis. They look to be turning around. I am buying into INTC here.