Huge Reversal For Stocks
I had to leave before the market closed, so I was thrilled when my colleague texted me in my meeting and told me the SPX recouped all of its losses.
I though the action in the market was meaningful today. I am seeing tons of upsided reversals in stocks and etfs on enormous volume. This is usally meaningful technical action. Look at some of the price-volume action in the likes of: ITA, IAI, IDU, IYE, MXI, EFA, EEM, etc. They all look like exaustion selloffs to me. I would go so far as to say that I believe the market put in a solid, near-term bottom today.
Notice that I did not say "the" bottom. That is something we will only know in hindsight. But today's action should lead to a tradeable bounce. From there we will have to see how the market holds up on any future retest of today's lows.
But there was certainly panic selling in the air this morning, as the Dow shed more than 300 points but fully recovered by the close. The SPX endured a +3.3% intraday swing. The volatility index (VIX) hits its highest level since the bear market bottom in October 2002, before revesing lower into the close.
It was the financials that led the way today, with the bank index rising +4.7% and the brokers bouncing for +3.9%. (Hard hit Bear Stearns spiked +13%) I'm sure this was mostly short covering, but that is how many rallies start after big declines.
Last, I noticed that there were 1080 new lows on the NYSE (according to Yahoo Finance). That is most I have ever seen, even during the bear market. I recall seeing Gerry Jordan of Hellman Jordan speak back when I lived in Chicago. He said that if you ever see 1000+ new lows on the NYSE, you can go long on margin and coin money over the next year. I wonder if he was buying today?
long IAI, ITA, MXI, EEM