Whether we have seen a long-term low remains to be seen, but today’s reversal signals at the very least a short-term low. The market gapped up on JPM earnings, but at the open sellers were able to regain control and send the market lower. It looked like we were going to plunge lower, but buyers were able to muster up the power to push stocks higher. A few will link the low to comments by Bullard as he stated at some point oil has to stop going lower. Other than a weak close gains along with volume were strong enough to suggest there is a potential this rally attempt will at least have a chance.
A chance does not mean there is a high probability of this rally succeeding. Odds are we will see today’s low retested at some point. The recent decline has done tremendous damage and it is going to take months to repair. Of course the Federal Reserve could launch QE4 and completely flip this market on its head. The key is to remain patient and wait for proper conditions. We are finding a few opportunities in this market, but they are not blowing us away.
Another positive is certainly sentiment. II Bulls are outnumbered by bears. AAII Bears hit 45% while bulls sunk below 20% to 17%. While we aren’t seeing extreme levels of bearishness we do have enough to see this market bounce. Remember, sentiment is not a perfect indicator. For now, a small bounce cannot be ruled out. Stay tuned.
Enjoy the long weekend ahead!
