Swing Trading Strategy:

Three days of chop, make it four?

It was a rally that probably had everyone surprised. I wasn’t expecting it that’s for sure, and it managed to close over 3.3% higher. However, nothing has really improved on the technical front and instead we are looking at another potential reversal today as the opening bell isn’t too far away. 

It seems likely to me, that there is another leg lower in this market and that most people are simply wishing it away at the moment and at the very least a retest of last week’s lows. While yesterday’s rally was impressive, it was marked by low volume and horrible breadth. Despite a 3.3% move on SPX, the breadth was only 3:2. On a day like that, you should be seeing at least 3 or 4:1. 

So be careful out there today, don’t leverage yourself too hard in one direction, and let price guide you. 

Be sure to check out my Stock Market Crash Update #5 that I posted this weekend. 

Indicators

• Volatility Index (VIX) – A notable sell-off that saw it finally drop below its 20-day moving average for the first time in over a month. Finishing at a still, very highly elevated level of 57.08.
• T2108 (% of stocks trading above their 40-day moving average): Big move there as it pushed 46% higher but still at 5.5% overall and the highest reading since 3/10. 
• Moving averages (SPX): Tested but unable to break through the 20-day moving average. 
• RELATED: Patterns to Profits: Training Course

Sectors to Watch Today

Heathcare was the market leader yesterday, and Utilities continued its strong V-shaped bounce off of recent lows. Technology was in the top 3 sectors moving higher, but overall, its bounced has lagged the overall market. Discretionary and Real Estate both lagged the market direction substantially yesterday. 

My Market Sentiment