For a bear, nothing feels better than a day that starts off strong but gets weaker through the entire day, only to completely collapse at the end. Tuesday was a lot like that.
Today was the total opposite. All through the night, the GLOBEX had been very negative, and after the employment figures came out, the S&P was down something like 20 points. The market opened down hard, and it spent most of the day fighting its way higher. Near the end, the climb become frantic, and the Dow wound up over 300 points higher than it had opened. Yuck!
I felt extra bad because I had carefully looked at the OIH and decided it looked pretty bullish. I bought a bunch of it early on, but I sold those calls later in the day for a good profit, declaring that I had lost faith in the longer-term prospects (I had targeted 170 at a level I thought the OIH could reach in the coming days/weeks). Anyway, the OIH also lurched higher, and frankly now it looks more bullish than ever! So it was doubly disappointing.
It also isn't lost on me that the SLIX indicator (that is, the traffic on this blog) spiked dramatically on Monday, and this is often a sign of a major reversal. Shame on me to ignore SLIX, which is something you'd figure I'd be pretty close to respecting! If tomorrow is going to be a big "up" day, I'll be kicking myself even more for not simply going totally into cash on Tuesday, which would be the SLIX-appropriate thing to do.
In spite of Lehman Brothers being at death's door, the $XBD looks like it may have bottomed on July 15th and might be ready to head higher; look at the similar patterns I've tinted below (added to which we didn't come anywhere near the prior low).
The candlestick pattern on the ETFs is horrifying. Look at the gargantuan bullish engulfing pattern on the DIA.
The same is try of the IWM (and so many others). This is particularly exasperating since the IWM (and SPY) broke beneath the lows set on September 5th. Indeed, early this morning, it seemed like we would have another sensational multi-hundred-point down day on the Dow.
The extremely oversold NASDAQ is sporting the same bullish engulfing patterns. I absolutely don't think today broke the bear's back, but a sizeable rally could be in the cards before we resume the downtrend. This is what I'm really concerned about.
A slightly less scary chart is the minute bar for the Russell 2000, which plainly shows that resistance (represented by the horizontal Retracement line) is still intact.
All this week, I've been pointing out the bullish potential of gold and energy. The OIH finally caught a bit of fire today, and gold seems to have firmed up on its fan line. I have a handful of bullish positions in gold, and a rally here could push the $XAU back to the mid 130s.
The graph on OIH looks as compelling as it did back in January 2008. I'm angry with myself for not letting the profits on my OIH calls run. This could be a very meaningful move higher.
It's pretty obvious I'm not feeling as jolly as I was in recent days! It was a rough day overall, including the terrible technical difficulties this morning. I can only hope tomorrow is a better day all around.
