Market Commentary as of Monday, October 26, 2009 Close
Fari Hamzei
Timer Chart shows us the McClellan Oscillators (MOs) have entered into short-term oversold condition. For NYSE the Advance/Decline Issues MO is at -212, and for for NASDAQ, it is at -161. Down Volume to Up Volume Ratio for today was at 7.1 to 1. While it was not outlandish, we are moving closer towards a short-term (dead-cat ??) bounce here. I wrote about this process on Twitter after the close last Friday.
A side note: While we came in long ES into the RTH today, we ended up shorting the SP500 Futures in rougly 1088 area towards the end of the first hour, which we rode down (with great pleasure) into lows of the day, within the next two hours.
But -- all our subsequent trades today were on the long side because we felt buyers would step in somewhere in here. Given how the market internals closed today, the chance of a bounce should be good in the next day or two.
Here is another look with only SPX data -- that is the above MOs are for SP500 components only -- both for Advance / Decline Issues MO and Up / Down Volumes MO. This is a new chart for us -- datawise -- thus we would refrain making any far reaching comments till we are more comfortable with its behaviour.
What I would keep an eye on is the sigma channels for the major vol indices. While VXN hit our target of -2 sigma and then market sold off, the reversal to the upside should come in the +2 sigma area which would translate to 27 for VXO and 29 for VXN.
Trend Change is always very tough to trade. Best advise is too keep your bet size very small and monitor the market internals very carefully throughout the trading day.
