Bounce off short term oversold conditions.
We thought a bounce would come, and market agreed with us.
Yesterday, I said
Index rushed down to a prior peak point, which coincides with the lower boundary of a rising channel (drawn in thick Red) and stopped there. A logical spot to lighten short exposure if one is concerned.
Index rallied smartly to the 848 pivot and 850 area of support/resistance that we have been talking about. Nothing has happened yet to force me to change my count. around the close, I put a portion of shorts that I had covered yesterday.
This is a 5-minute chart of June futures
Notice that the second part of the rally, from 2 PM or so, looks quite choppy, and corrective in nature. That gave me some confidence to add some shorts back on. I don’t know how far this will go, or how long it will take.
This is the 60-minute chart of the index that I have been using as a road map.
It is not uncommon for the price to get back to the underside of a broken wedge, or even get back inside the wedge briefly – something to watch for.
This is the somewhat different chart of the June contract
Today’s buying was not enough to turn the Stochastics up – just an observation
Price is in support/resistance area of 850, after that we have 912 pivot. Next support levels come around 825 (an area of previous tight actions), 815 (top of a gap down on March 30), and 789
Short term trend is down. Mid-term trend is up. Long term trend is down.
Food For Thought: My data provider shows the June contract at 4-5 points discount compared to cash index. Backwardation on S&P 500? In fact, that was true of Nas100 and the DOW as well. What does that mean?