The very emotional and weak open with at one point 3 to 1 negative breadth gradually improved to give us a very volatile day that ended up being a "key reversal" day. The markets ended up 1.3% to 2% today on volume that was 25% higher than the day before. Adding to that, all indexes closed at their HOD (high of day). This follow-through comes on the 5th day of the most recent rally attempt started Oct. 13th. Also, remember, the count of distribution days have been reset with this follow-through. So all those distribution days the past two months are now erased and we are back to zero distribution days.
The talk of the dead-cat bounce being dead after yesterday's distribution day and the new lows in the morning opened up the flood doors of crash callers and blatent panic selling by bulls that thought the "bounce" was officially killed. This in turn caught the short sellers extending themselves too far and caught bulls selling their stock they just bought two days ago. By cleaning out the weak bulls and creating too much confidence in the bears this morning we were able to put in a bottom.
After the small yet none-the-less distribution day of yesterday it appeared the market was going to rollover and make new lows. But just like during the April/May bottom, a minor distribution day was needed to bring out excess pessimism that led to a nice rally. I am not sure how much rally we are going to have but the tepid selling of yesterday being met with the huge rush of big buyers today leads me to believe that we should be able to get some good gains from this.
This follow-through does not guarantee that more gains are for sure to come but no rally has ever started without one. This lifelong poker player will take those "bull" odds anyday of the week.
I covered every single one of my shorts today, taking losses on the most recent small buys and taking long-term gains in all homebuilders and any other stock showing long-term gains.
New Swing Longs: JCOM RLI FCN IMN WES BRLI EFII NUHC
Longs Outperforming Market: BRLC SMTS PPDI ADST LWSN TEVA PRLS OXGN CAMP FLO TAYC FAST PBCT
New Swing Shorts: NONE
Shorts Outperforming Market: There was one outperforming-ZMH. But do you know how many I recently took that I had to cover for a loss? Way more than you would want to know.
4 comments:
Do you mind sharing your losses from shorts? Not to pull you but for my education. I ended up covering some of my shorts today as well.
If you go through my daily archive you can see the shorts I took the past two weeks and pull up the charts of those.
I always cover a short if it closes above the high of the signal day. You can do the math but today I took almost a 3% hit. But the money made the past two weeks on the shorts well make up for it.
Still it is never nice to look at your account and see it down so nicely when the market is up so nicely. That tells me that the right side is the Long side, once again.
What is a signal day? Sorry for asking dumb question.
The day I buy it. The breakout day.
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