In order to form a durable bottom, the market must exhibit noticeable changes in character from that which we saw during the correction. Recall the many times since September when the market would open reasonably strong, only to give up the gains and then some by the time the closing bell rang.
Since November 16th, though, we have seen more intraday reversals of the bullish variety, including what we saw this morning. Turning to the 30-minute SPY chart below since 11/16, note that we merely filled an open gap (purple line) from Friday with this morning’s weakness. On its face, a gap-fill is not a bearish event. The more important indicator is gauging how motivated and powerful buyers are to step in and alleviate the gap-fill condition. Based on what we see below, the bulls did indeed rise to the occasion with a V-shaped move off the lows.
As I noted this morning, an “open weakly, finish strongly” day would likely bode very well for bulls going forward and add credence to the case for a change in character. However, sitting above on the S&P 500 Index are the declining 50-day moving average and the key 1420’s zone. Thus, a measured, methodical approach to legging back in on the long side in terms of overall portfolio allocation is still probably correct.
Nonetheless, these changes in character, assuming the rally does not fall apart into the close, command respect.
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great analysis as always
thanks, bobbin!