Thursday’s market certainly was witness to another extreme intraday session. The NASDAQ was up 115 points on the session and the Dow was up nearly 370 points. However, that was not the case just after 3pm eastern. The market was sinking to new intraday lows and was looking to plunge into negative territory after being up more than 2% for much of the day. Miraculously there was a massive kick-save and the NASDAQ rallied nearly 90 points in less than one hour. Volume was lower on the session indicating it wasn’t massive buying interest, but more likely more short covering. This market has snapped back from Monday’s lows and despite the nice rally the damage done by the selling has yet to be cleared.
Sentiment has certainly shifted with the II bears coming alive and the NAAIM sentiment survey reaching new lows. It is not a surprise seeing the amount of bearishness in the market we have seen the bounce we have. The NASDAQ is up more than 12% from its lows set on Monday morning. Much like the flash crash this rally has soothed many into thinking everything okay. Unfortunately, the flash crash lows in 2010 were revisited 3 times before establishing a base to rally from. While we are not saying this is precisely like the flash crash, but they share similarities that are difficult to ignore. Let’s not forget September is not a kind month to stocks. This rally here looks like an opportunity to short rather than to get long.
Futures this morning are pointing to a lower open. Heading into the next to last weekend before Labor Day and Monday being the last day of the month leads us to believe this morning dip will likely be bought. Whether or not it continues throughout the entire day remains to be seen. For those trading intraday keep to your stops and avoid trading to just trade. This is one volatile market and will whip those who are not controlling risk around.
Good luck and have a great weekend!
