Things were looking pretty bleak for most of the day but a late day bounce saved the market from a total meltdown. The bounce was ‘blamed’ on short covering and I wouldn’t be surprised if that was actually the case. The market is in oversold territory and the short-term traders would be wise to start taking profits. Today’s action created a lot of hammers (and doji) in individual stocks, which I’ve been wanting to see. You could really feel the psychology of the hammers today. It felt miserable to be long today and clearly many bulls threw in the towel early in the day. I got stopped out of a couple of my positions early but I bought a couple more later in the day. Let’s see if we can confirm all these bullish candlesticks by trading above today’s highs.
Let’s hope it all works out. What a classic way to lower people’s expectations for earnings and pave the way for the bulls to run free again. The last two rounds this year featured very strong and bullish action going into earnings, action which was subsequently swatted mercilessly (see Jan and April of this year).