Today it had a valid first rally attempt. The market may come out of the correction sooner than we thought.
Yesterday the S&P 500 failed to reach 2722 which is the 38% retracement level and reversed the selloff a little at the close.
As of yesterday, in 21 trading days the S&P 500 had a 7.63% decline from high to low. It was also 1.67% below 200-day moving average.
Below are the conditions when the March 2009 and February 2016 bottoms’ come out of their first correction. Both conditions are very similar to what it looked like yesterday.
Today it gaped up passing yesterday’s high and traded in a very bullish manner intraday. It closed above 2800 with 2.14% gain today with above average volume. Nasdaq and the DOW also closed with above 2% daily gain. This is a very valid first rally attempt. When the market follows it with an explosive rally within the next 4 to 6 days, that’s a confirmation of the end of the correction. That’s when you need to open long positions.
Apparently the Fed is stepping in to rescue the market. So the Fed will stop the market from going lower, but the explosive long term rally will have to come from the resolution of the trade war. With the central bank’s promise, the market felt a great sense of relief. You will see money will start to put to work again.
It’s Okay to try to open long positions now without waiting for the confirmation, just know your stoploss is S&P 500 at 2722 level.