Whipsaw

S&P500 daily at end of day

End of Day Updates

Stocks recovered from Friday’s selloff, reclaiming the psychologically important 50dma and 2,100 level. Volume was conspicuously absent, but by itself is not automatically a reason to doubt the rebound.

Last week we crumbled as plunging overseas markets spilled over to our shores. Todays low-volume recovery shows the remaining owners are not concerned and we bounced as a lack of selling constrained the available supply. No matter what people think the market should do, the path of least resistance is higher when stubborn owners refuse to sell.

It’s been a volatile but largely unproductive year. Buy-and-hold investors are up less than one percent, but by many measures they are the lucky ones. Any bull or bear coming to the market with an agenda is getting slaughtered buying strength or selling weakness. The only ones doing well are swing-traders betting against each move.

Source: Stocktwits 4/20/2015

The trading range for the year has been ~2,000 to ~2,100 and we’ve been stuck between ~2,050 and ~2,110 since February. Today’s move leaves us near the upper end of that trading range. There are only two things that can happen here. Either we blow through resistance and launch the next rally leg, or this up-move stalls and we remain stuck inside the trading range.

While it would be nice to see the market march higher, Friday’s dip did little to reset the bullish sentiment that is creeping into the market. The most profitable upside moves are born from pessimistic ashes. Today’s low-volume rebound tells us owners remain confident and optimistic. I’d much rather see pervasive gloom and doom before betting on another rally leg. While the bounce can push us back to old highs, this is most likely another selling opportunity, not a buyable breakout.

Jani

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