A wild day on Wall Street as the stock market takes a roller coaster ride finishing in the green. Volume jumped day-over-day as selling volume was gigantic early this morning. AAPL kick started the rally with its losses being reversed by lunch time. Others followed suit leaving the major market averages well off their lows and the NASDAQ leading with gains. What some may have seen as panic the VIX really never got going only hitting the mid-16s during the trading session. Buyers did seem willing to step in when it appeared the market was about to fall flat on its face. Today was simply one session and while the reversal was on big volume we need a bit more out of this market.
While this should lead to the market climbing over the next few sessions it is hard pressed to think this will produce big gains. For one, the VIX never jumped above 20. Secondly, we still have a tough seasonality trend to break. While stock market rallies tend to begin in fall they typically start after a steep decline. We expect more of the same from this market: more chop.
We are still receiving sell signals from many of our holdings. While this may be a product of today’s market will need to see buy signals flooding our scans. It can take a few days for signals to be generated so don’t worry if you didn’t bottom tick this market. In the end, it could be one giant dead cat bounce. No one knows the future and it is best to stick with a proper system with a robust risk management strategy. If you are not controlling risk you are opening yourself up to potentially massive losses. Position sizing and exits are the most important piece to your trading strategy. Entries are fun, but they are not the most important part of your trading.
Today’s low becomes an important point to keep a close eye on. If we are to move higher we should not take out today’s low. A little sideways action here would be good along with leadership emerging. FB and AMZN are two stocks we are looking at to gauge the health of this rally. If we are to continue higher look for these two to lead the way.
Today was certainly not a dull day by any stretch of the imagination. A solid move off the lows, but now we need to see some constructive action to get us higher.
