Friday's rally suggests a potential bottom in near term, however a follow through confirmation is needed. BUT in longer term, this might just be a bear rally which could extend for next few weeks/months before further breakdown. BUT how do we arrive at such a conclusion? Where would we get a potential bottom!!! Not much has changed as BPNYA continues to remain below EMA(30) while Volatility ($VIX) continues to linger around 20-25 area. Daily NYSE chart below provides a clue of possible short term bottom. Take a look at divergence between NYSE and PPO, last Sept-Oct we had similar situation and market rallied for almost 6 weeks. We might get to see similar rally up to 9600-10,000 area. Long bottom tails on recent bars in Weekly chart below suggest a reversal in short term which is also in sync with daily chart. However, this could just be another bear rally and NOT a trend change. Once the bear rally has run its course we might see a final decline into 8500 area where a strong support can be seen. NYUD well below EMA(21) suggesting a clear sign of bear market and will take some time to recover or trend change. Also RSI is trending down and currently appears to be near oversold levels. McClellan Index is trending down suggesting more stocks are declining compared to advancing on cumulative basis and Market shall continue to drag down further until this changes. Overall, it appears that we may get a bear rally for next 6-8 weeks but DO NOT get fooled. This could be markets move to trap more people to cause maximum pain for further decline. Its better to remain cautious and alert.
What does it mean for our Investments?
Bear rally might be in the cards... Comments are closed.
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