Wednesday, August 24, 2011

a good day today

a decent day today in the market.  As I had hoped for, the market closed well above my target on the IWM.  that target (68.25ish) should become support for future pullbacks.  Today it came down and touched that number 5 times ... four of the five times it bounced off of it within minutes and the other time it stayed below it for about an hour.  The fact that it tested that number and wasnt able to break for any length of time is important, it shows the market players are respecting that level and doing their best to stay above it.

although internals continued to look healthy today and I purchased more on the long side, I am by no means betting the farm on a full recovery at this point.

There are still a lot of people that are short and wanting the market to fall and until the market stabilizes and scares out these people we will be sitting a bit.  A bit hurdle to gain the confidence of the public is coming up soon and that is passing the previous high set last week before the market starting falling again.  On the IWM that number is $71.83.  If we can break that resistance barrier (which will probably take a few attempts to accomplish), this will send a loud message to the investing community that we can now start moving higher.  Once this occurs, I expect the cautious players to pile in and we should see a nice move from there.

There is one troubling item in my analysis that needs to be addressed at some point, and that is that the volume hasnt been terribly stellar during the past two days.  I am generalizing here, but generally speaking Volume shows the level of conviction of buyers / sellers.  So on up days, ideally you want more volume than on down days ... kind of signaling that there is more conviction to buy than sell.  This is gross oversimplification, but I want to keep this simple at this point.  So ... after such a strong downward movement, we ideally want to have a strong volume day (or days) to show the conviction of the masses wanting to get back into the market.  I suspect this might not occur until we surprise the most recent high (see paragraph above), but the market might not wait around long enough for that to occur.  Many, many people look at volume as a key indicator in the strength of a trend and if we don't see a change in the next day or two, I expect the shorts to start salivating ... and we might possibly get another retest of the lows.

Besides the lack of volume, all my indicators point to more upside, but I still feel it is just too early to be fully bullish for the long or intermediate term investors ... hang in there and let's see if this pocket of strength continues for a few days before going long.

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