Wednesday Weakovery – Low Volume Rally Gives Us Hope

Quite the bounce.

All it took was a few words from China, Mexico and, of course, the Fed and the market was off to the races again led by the small-cap Russell Index, which is already testing the strong bounce line at 1,510 in the overnights.  We're still waiting for the Nasdaq to make it's weak bounce line at 7,250 but, on the whole, we're glad we kept our longs in play (covered with hedges, of course).  As it stands now, we've got a lot more green on the chart than we had yesterday morning:

  • Dow 26,700 to 24,700 is 2,000 so huge 400-point bounces to 25,100 (weak) and 25,500 (strong)
  • S&P 2,950 to 2,750 is 200 so 40-point bounces (or what I said above) to 2,790 and 2,830
  • Nasdaq 7,850 to 7,100 is 750 so 150-point bounces to 7,250 and 7,400
  • Russell 1,600 to 1,450 is 150 so 30-point bounces to 1,480 and 1,510

That's really about as much progress as you can expect for one day but the underperformance of the Nasdaq is a concern and, as you can see from the daily chart – even the 100-point rally off the bottom isn't enough to put much of a dent in the 850-point drop – so we'll be watching the Nasdaq very closely today to let us…
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