October 30, 2009
The S&P 500 Index (SPX), and it’s tracking ETF the S&P Deposit Receipts (NYSE: SPY), had solid rallies on Thursday, October 29, completely erasing the previous day’s almost 2% losses.
A solid gain is always bullish, but there are reasons to be very careful here.
Typically the stock market corrects in waves of three. The correction lows on Wednesday would only be a single wave down. If this is the expected second wave higher, it will be followed by a third wave to new lows in coming days or weeks.
Another concern is the Nasdaq Composite Index (COMPQ) and Nasdaq 100 Index (NDX). These indexes rallied, but did not erase the previous day’s losses. In fact they both had “inside” days. Such days do not have highs or lows that exceed the previous day’s trading range. Such days are considered indecisive and not bullish.
Could Thursday’s rally be the start of a new leg up? Of course, but the markets are more likely to see another leg down before any lasting advance is begun.
The http://www.fibtimer.com ETF Strategy has a position in the S&P 500 SPYDRs.
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