Joined Nov 11, 2007
1,458 Blog Posts

Looks Like a Tradeable Bounce Ahead

Keeping with my recent theme of using two indicators to gauge market swings, the bloodbath of the last two days has again aligned these indicators so that they are suggesting a tradeable, 3 – 5 day bounce is ahead. Let’s take a look…


6_20 Breadth

The green Decline Line Indicator is maxed out at 100.

The red Number of Stocks Trading Above Their 5 Day Moving Averages Indicator is reading 316, which is well below the preferred threshold of 650.

As shown in the chart, when these indicators align, a tradeable bounce tends to occur. I set the arrows up to reflect a 3 day hold time after the signal.

The wildcard is of course that we are in a downtrend, which changes things. You’ll note that most of the bounces on the chart above have come during pullbacks in an uptrend. Because of the strength of this sell-off, I’m looking for a bounce that will rise only to the 50 day average. From there, I’m expecting we’ll see the old Bears at the Honey Hole routine.

How $SPY behaves on this bounce (if it does bounce) will help me decide what to do with my long-term $SPY long position.

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One comment

  1. ripper


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