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The next day saw the further selling, with the SPX actually breaching the next Fibonacci level. That same day we had a reversal, on volume, with the market closing above the prior day's close and near its intra-day highs. A bullish sign.
So, where does that leave us?
The market remains in a bearish correction, but there has now been an attempted rally. That rally attempt began on Tuesday, with the intra-day reversal. The market must now follow through on volume if this attempted rally has hope of pushing to new highs.
Let's look at the bigger picture, however. What you see above is a long term, monthly chart of the S&P 500 dating back to before the current bull market began. From a long-term view we are still in an interim bearish trend, but is this correction nearing an end?I sought confirmation of this from MarketClub's chart analysis software and stole an image capture of that analysis, which I have inserted below. What is nice about this analysis is that it is based on defined, objective criteria and the factors being considered are clearly identified.
The outlook remains decidedly bearish, which is consistent with our current directional bias. We have seen one day of buying on volume since the market sold off on February 27th, but one good day does not make for a market rally. Until we see evidence of further institutional buying you will want to be cautious of further potential downside.Meanwhile, my 1,460 - 1,470 bear call spread remains safely out of trouble. I will continue looking for an opportunity to roll into an iron condor, but I am being rather cautious about this because I want to remain safely away from the market and I also want a healthy credit to justify the risk of selling a bullish spread. Patience and caution are my current watchwords.
Good trading!
Christopher Smith
TheOptionClub.com
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