Bird’s-Eye View

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We have a nice bounce going this morning, with the indices up roughly 1% across the board. After popping entirely below their respective lower daily chart Bollinger Bands, a bounce was to be expected here. In order for me to get involved for swing trades, though, I need to see some evidence that the bulls are back in charge for anything more than a quick flip.

Many traders are watching the 50 day moving average, and price is coming back up from the downside to touch it. That reference point is currently at 1373 along with price this morning. More importantly, the breakout point from that cup and handle breakout from early-March was lost yesterday after an initial gap-fill up around 1380. Thus, I would need to see that level recaptured before getting involved again.

I expect to see some herky-jerky action this afternoon, as price swings have become more violent. A failed bounce is something I had discussed as a scenario over the past few days. Overall, though, the highest probability scenario is that we have an inside day within the confines of yesterday’s price action. Patience is virtue while the market tries to sort itself out. Buttressing your portfolio with a heavy cash position is a good method to be in the bird’s-eye view, objectively watching the action before deciding which way to act.