Another great day in the markets!
In yesterday morning's PSW Report (just $3 a day and look at all our great days!) I said:
Today is the last day of the month so we're looking for bounces off of all those bottoms and you can play for the bounces (with very tight stops below), which are 20% of the drop as a weak bounce and 40% of the drop as a strong bounce where failing the weak bounce is bearish and the strong bounce has to be taken back in less than 48 hours, or that's bearish too.
That means, for example, the 250-point drop on the Dow (/YM) should get a 50-point bounce, back to 25,350 just to be considered a weak recovery and 25,400 is the strong bounce line. Anything less than a weak bounce today is a strong indication that we're not done selling off – especially on a window-dressing day like today. On the volatile Russell (/RTY), we fell 45 points so we'll round up to look for 10-point bounces to 1,665 (weak) and 1,675 (strong) but we need a stronger Dollar for the Russell to get it in gear.
At the time, the chart on the Russell looked like this. I know it's confusing because we only TELL you what is going to happen and how to make money on it but, when you look back at the trade ideas, you can't believe we didn't have today's chart yesterday, since the market does EXACTLY what we tell you it's going to do. Pretty cool, right?
Likewise the Dow spiked up to 25,475 (up $875 per contract) but then failed it's strong bounce line at 25,400 and finished the day right between our predicted weak and strong bounce lines at 25,374. Remember, we are not using TA – we are Fundamental investors who think TA is complete nonsense – this is just math. It just so happens that our math (the faboulous 5% Rule™) tends to perfectly align…