Today’s price action is setting up a classic game of chicken…
The light volume pause (@100 m shares traded in the SPY) is a good sign for bullish traders. If the stock market holds this bid in the next day or two, the bears will blink. Short-sellers will have no choice but to cover which will add fuel to the bullish tone.
I want to be clear, I am not “bullish” based on only two days of trading (10.2 and 10.5). The reason why I think we could see short-term higher prices is because the bears are trapped, and they know it.
The price action prior to October 2 was forecasting lower prices but the market stopped dead in it’s tracks.
Nothing wrong with this. A couple of light volume days at support were expected before the next leg down. The weak jobs report the morning of October 2 gave the bears a gift and pummeled the market at 8:30am.
The majority of the S&P not only refused to trade lower, we receive a vicious rally out of the blue. The bears are trapped. You can hear the flight attendant giving instructions for the crash. “Your flotation device is under your seat…”
The stage is set because we did not trade lower ($188 support in the SPY) and because we did not flag and pause near that support.
A game of chicken is afoot… Who will blink?
Stock Trading Recap 10-6-15 Tuesday Video
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End of Day S&P 500 Map 10.6.15
Most of the S&P 500 is mixed today but you will notice the green in the upper left corner.
Energy and basic materials have found buyers and are now on a clean breakout after a 2 month trading range.
Pharma and biotech continue to see supply dumped on the market. TEVA a nice downtrend and slid day trade recently.
SPY End of Day Chart 10.6.15