Today’s 10/07/21 powerful opening rally of US stocks added evidence that the decline from early September is probably a correction within an ongoing bull market. The big question – is the S&P 500 (SPX) 10/04/21 bottom the end of the correction?
What happened during today’s trading session puts doubt in the case that a new bull move is underway. The high of the trading day was made within the first trading hour 9:30 AM to 10:30 AM – ET. Normally, later in the day there’s a move above the first hour high. Today not only was there no follow through, near the end of the trading day the SPX was testing the low of the first hour trading range. This type of action is exceedingly rare and implies the bulls lack conviction.
Other factors favor the bear case. Time – there’s still three weeks in the bearish season.
Price- the SPX 10/04/21 bottom was not near any significant Fibonacci or chart support.
The daily SPX chart courtesy of Trading View illustrates where a more significant bottom could form.
The still rising 200 – day Moving Average (MA) is now at 4150 in a few trading days it could be near chart support at SPX 4164. Frequently corrections are drawn to and hold at the 200- day MA. If later in October, there’s a move down to 4160 – 4170 it could be an area of strong support.
At today’s open traders were stopped out of half of a 150% short position. The total percentage move down from the 09/09/21 entry was 2.86%.
Half of 150% is 75% x 2.86 = 2.14 profit.
Continue holding short the remaining position.