First day back from a long weekend the market jump higher as global markets rebound. Volume was higher on the session as buyers were trying to scour the market for a good deal. Today was day 2 of our newest attempted rally. At least we have volume accompanying with price, but we are not seeing the proper base setups to gives us confidence this move can last. Anything is possible in this market and we need to be ready by executing our strategy.
It does appear everyone is picking a bottom as the number of Bulls have dropped so low. The lack of capitulation really gives us pause this rally will be ultimately succeed. Typically, bottoms are formed when a washout occurs. VIX usually jump to new highs and volume spikes as a new low is put in place. So far, we just have the number of bulls at lows and that is it. There are hurdles for this market to get over and resistance will be closely watched.
Another wrinkle this market is dealing with is certainly Friday’s option expiry. Known to cause issues the monthly expiration of options tends to cause volatility. Volume will more than likely increase, but price action is most important to us.
Another big story early this morning helping the market initially was OPEC agreeing to a production freeze. Crude oil initially jumped on the news, but the commodity couldn’t sustain the rally. We doubt members will slow production as they will pump all they can while they can get paid for the oil. What is likely is an event shuttering oil production and we will finally see a bottom.
Let’s see how far this rally can go. We will continue to manage our strategy and protecting our capital.
