Stocks rebound, Oil and Gold lower

spy1113.pngStocks rallied sharply today. It may have been a dead cat bounce, but was an awfully large cat. It wasn’t surprising to see a bounce after such a large drop in all the major indexes, and especially the high flying momentum, bubble stocks. I suggested a return to that red line on the SPY, again shown on the chart to the right. The double stochastic has turned back up from an oversold level. As it stands now, the market structure is still bearish. V shaped bottoms do happen, but it is more normal to put in a spike bottom, then bounce, then retest to see if the low holds or falls through it. During sharp uptrends it is normal to have sharp one day shakeouts to knock some traders off the bandwagon, and then to regroup and continue the rally. In downtrends the same thing can occur in reverse, that is after an extended downtrend it is common to see sharp, quick short covering rallies, and then a continuation of the downtrend. I suggested those guidelines as being normal, but the current market doesn’t feel too normal to me. Of course anything can happen without conforming to what is historically normal. The counter-trend moves attract a lot of attention, but can be a trap. If this rally continues up past those blue lines I’ll have to re-think my bearish opinion. At the moment I’ll assume this is a counter-trend rally within a longer-term downtrend in the stock indexes. For my way of looking at the markets, a violation of the red resistance line would not turn the trend back up. It would take a close over the Oct 31st high, which is that peak ten candles back.
Oil let out a little more air out of its bubble and closed down three and a third dollars. Pit contract of gold closed a dollar under $800, but is back over $800 in the after hours session. Even the wheat bubble is letting out more air almost every day. Remember a few weeks ago when everyone was talking about wheat going over $10. It’s now under $7.50 and dropping almost daily. Respected analysts were coming on CNBC every day talking about the big bull market in wheat and how it just had to keep climbing because of all the bullish fundamentals, and that there was never to again be a down day. I haven’t seen those analysts lately.
The Baltic Dry Index has turned back up and is testing its recent all time high, with the world stock indexes substantially off their highs. It will be interesting to see which one is leading and which one is following.

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