Rumors of a potential third round of quantitative easing helped lift stocks from the lows of the session. A dismal report from the ISM Non-Manufacturing survey put plenty of pressure on stocks as volume swelled. The VIX on the other hand did not confirm the capitulation type volume we witness on both exchanges. Rumors of a possible third round of easing by the Federal Reserve Bank (QE3) began circulating throughout the market gave a boost to a deeply oversold market. Today marks day one of an attempted rally, but the damage from the last eight trading sessions will take time to repair.
By any measure of the market we were deeply oversold and due for a bounce in the market. Remind you they are still below their 200 day moving averages, a key level for the market. Another day or two of a market rally would not be out of the question to relieve the selling pressure. Even a small rally back to the 50 day moving averages is not out of the question. However, as we move away from earnings season there are very few catalysts to push this market to the upside. Not too mention the damage we have seen to this market recently. It will take a lot of time to repair what the selling has done.
We have had quite the talk about a possible market correction and pending disasters. All of which are highly probable, however it isn’t our game to “guess” or “gamble” on a hunch. The next few days will be a big tell on if this attempted rally will be successful. Historically speaking, August is a month where the market does see bottoms. However, as of this moment there isn’t much market leadership at this time to be confident we can confirm this market rally.
Do not be a hero in this market. Friday’s job report will be watched by the markets with an eagle eye. Given the past few ISM reports it’s hard to be confident we’ll post enough jobs to keep pace.
Be prudent.
