By Jeff Pierce
My thoughts on yesterday’s action is that there was simply an oversold bounce that was likely to happen with or without a catalyst, but was ignited when some fiscal cliff hopeful resolution hit the news wires. I don’t trust a low volume news rally based on hope and with the VIX trending higher on the 60 minute chart I believe this market is going lower.
Maybe today is going to be a bullish day — pushing the VIX back to $18-18.50 range, setting up a meltdown in the markets next week when nothing is resolved with the fiscal cliff or traders just don’t like the resolution. We also have a full moon tomorrow, but given how choppy the markets have been I don’t really have any clue as to how that’s going to effect the market.
Volatility Index ($VIX) – 60 min.
We’ve simply rallied back to resistance with yesterday’s late bounce. The most bearish thing that could happen today is if we gap up at the open as we will most likely fall after that as we’ve come too far too fast. No market goes straight down or up so days like today are actually bearish as it gives the market time to work off any oversold conditions. I continue a three steps down, two steps up market as my proprietary indicators remain very bearish.
Dow Jones Industrial Index (INDU) – 60 min.
Jeff Pierce is a momentum trader that specializes in market timing. He utilizes a proprietary timing system that helps minimize emotions and trading biases within his trading plan. He offers a free newsletter at zentrader.ca that alerts you to trend changes within the market so you’ll always be on the right side of the trade.