On Monday, I mentioned the notable weakness in Japan as a shot across the bow for equities at-large. While the Japan weakness did lead to a sell-off in America on Wednesday, as you can see below on the updated chart we are now seeing a monstrous gap to new highs, potentially signaling a bullish island reversal.
However, before becoming giddy with bullish enthusiasm, consider that this type of price action after a prior steep uptrend is still a warning shot in and of itself. The violent indecision of bears winning huge one day, bulls the next, and so forth, certainly does not signal the cool confidence of an uptrend in its healthier phases.
Even with today’s gap higher in Japan, or perhaps because of it, I am even more weary of embracing risk appetite for swings.
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