A Picture Perfect End To The Week: Outside Reversals Galore
The market action today was textbook bullish. The news before the bell was terrible, and the market opened weak. But as I mentioned in my opening post, it was not as weak as you would have thought, or as weak as that same news might have caused a couple months ago. And as the session wore on, the market began to firm up.
By the end of the day, a full buyers panic had developed, and the market soared +3-4%. That's huge. Remember, its not the news itself but how the market reacts to that news that is important to investors.
The fact that the market was able to rally in the face of the negative jobs report shows that, at least for the moment, the negative news flow has been priced into stocks at current levels. This raises my confidence that the market can continue to work its way higher into year-end.
The bullish action today was evident in a number of different areas and asset classes. I talk about "outside days", where the chart of a given stock/index falls below the prior day's low, but then rallies to close above the prior day's high. You can see plenty of examples of these outside reversals: SPY, QQQQ, IHI, XBI, XLF, TBT, FXY, VIX, etc, etc.
I mentioned that I was dipping my toe back in the water earlier this week with some ETF buys. I'm feeling better about them now, and will likely look to use upcoming pullbacks to put more cash to work. I said I wanted to see the S&P 500 consolidate and hold the 850 level, which it has done. It also closed above that downtrend line I showed yesterday, on good volume.