Tuesday, July 20, 2010

Intraday reversal is not a bottom!

Today's action in the markets were very significant.  I had earlier done a study on 2% or more declines on option expiring Fridays  and found the stocks bottom on the Tuesday following. That is kind of what happened today.  I had parked that study because of the bull leg we were in since 1980 and all good size declines were followed by  good rallies.  None the less today was an intra day reversal SPX first making a LL and then HH.  While that is big, very rarely does SPX make a low on a intraday reversal day.  We are still below the 50 and 200 day Mvg. Avgs.   We do not have a DKOD and in spite of the turnaround bullish ETFs have not crossed their DOMAs.  We are barely at the 50% retracement on TNA or FAS from recent declines.  We do have a 10 period and 20 period mvg avg crossing on the hourly on TNA and TZA.  That is positive to some extent.  This rally could have been caused solely by short covering specially with AAPL reporting earnings.  Of the prominent companies AAPL is the first to report good earnings.  They are the premier tech gadget company and with each new novelty item it is kind of hard not to, Ron Popeil also makes a lot money with new gadgets from knives to Rotisserie and many others.  A small rally or a big rally for a day or two does not change whole lot of things.  I would be watching unemployment and housing starts.  Fed money has dried up for these and the effect should start showing up. 
 Optimism is a little high for my taste and I will try to get in on TZA if and when I get a good signal. 

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