This had to be one of the wildest sessions I’ve seen in a very long time. We had some many sharp moves & reversal based on newsflashes — some real and some not so much. The Brady Bunchesque layout of talking heads on CNBC didn’t help much either. If you didn’t see it, they had eight talking heads on in little boxes all chattering about AIG, LEH, the Fed, etc. It made for very treacherous trading, especially in AIG, because they were just spreading rumors all day long. It reminded me of why I don’t trade stocks with rumors swirling around them. But when all was said and done we got what appears to be a pretty good reversal day.
Today’s action didn’t meet the requirements for a key reversal day because yesterday’s highs weren’t surpassed. However, we did have extreme volume and a gap down at the open and the indices made bullish engulfing patterns today. (Note that engulfing patterns only look at the opens & closes, not the highs & lows.) That clearly shows that sellers over-reached. Like I said this morning about all the folks looking to initiate shorts — they stuck their faces right into a buzzsaw. The smart & early bears aren’t done yet though. Many of them were probably covering their positions today and looking to reload higher. The September trendlines, which are still intact, are the first place I’d look for selling to resume. So now it’s all about follow-through.
This action on the Nasdaq is exactly what I like to see on a double-bottom attempt. I want the previous low to be taken out. That should trigger any stops people have set under that first low and thereby shake out the last of the sellers.
We had very similar action on the S&P. (Because of those staggered NYSE opens you’ll have to look at the SPY chart to see the bullish engulfing.)
The Russell is really determined to cling to its 50 and 200-day moving averages.
Minor upgrades to the Russell 2000…
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Down | Down | Lat(+) |
| Intermediate | Down | Down | Lat(+) |
| Short-term | Down | Down | Down |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
yup, bottoms are made fom buyers and not sellers (not like yesterday action). agree today we saw some, although they were only short covering…..its a step forward at least!…nice blog…congratulations!
Today’s the 16th …
damn cutting & pasting got me again. Thanks Bill.
Mike, thanks for an excellent post, but shouldn’t it be “September 16, 2008 Recap: Reversal Day on Extreme Volume”
Can you possibly post a T2108 chart, too?
Please delete my comments. Too late…
William,
I posted T2108 last night. It pretty much looks the same today. It rose to 24.00 today.
Mike…congrats on the mention at The Huffington Post via Howard’s article. Kudos on a [continued] job well done!
http://www.huffingtonpost.com/howard-lindzon/dow-10000—-what-happene_b_126871.html
Mike, I agree with the not trading stocks swirling in rumors. Too much action from baseless fear and hubris.
I love that Brady Bunch analogy. Wish I coulda seen it. Note also that the S&P bounced off 3-year lows, right at the bottom of the second sell-off from 2005. Coincidence? Hmmm…
And I agree that the bears are reloading. The news I saw about Libor spiking and credit seizing up suggests this is far from over. But let’s enjoy the bounce while it lasts…
This is going to be one SERIOUSLY volatile bottom. I got badly faked out yesterday. It was around 10:30 or so when the rally started to lose steam… AS SOON as I went short on UYG, the AIG rumor came out from CNBC. I didn’t even have a chance to get my stop in. First time that’s happened to me in a long time… thanks CNBC! Be careful trading out there!
So true. I work from home now 3 days a week and have CNBC on all day (sometimes muted) and it was absolutely hilarious how much control those clowns have, or at least mind control over those that are reactionary. It was funny.