Stocks made a nice recovery today. I had thought the market was looking a bit overdone on the downside. Sentiment was getting very negative. The stock indexes opened very negative, but then rallied after news was released, only to fall apart once again. Later in the day indexes turned back up and finished mostly on the plus side. GM helped after posting number not as bad as expected. Also, oil eased off a bit from the ever increasing bubble. The chart above shows a horizontal line on prices. You can see the bar from today probing the support at the green line, and so far rejecting the lower prices and closing at the high of the day. This is the third time that price area has rejected prices. It appears shorts were aware of this level and probably covered once it was clear prices were uncomfortable at the lower prices. The intra-day action looked like short covering. Volume picked up today. I would still like to see a rally into the moving averages (not shown on above chart – refer to previous posts) to see what happens to volume and momentum. If prices find resistance with an overbought momentum reading, another leg down would be likely. The Nasdaq found support under the 50% correction level from the March low to the May/June double top. The Nasdaq futures probed the fib 61.8% retracement level from that same uptrend, and rejected that level and put in a bullish hammer candle. The day session Nasdaq put in a bullish outside day, or engulfing candle. It will be interesting to see if any momentum can build on the upside to at least put prices back up into the area of the moving averages. Counter trends are difficult. The selling can resume quickly. The biggest negative can be seen in the lower sub-graph, which is the advance/decline ratio. It is still declining. This leads me to believe, at least the way things look now, that any rally will be short lived. That could change if the oil bubble bursts.
I haven’t shown the Baltic Dry Index for some time and thought I should put up a chart. The blue line is the index and the red dots are a parabolic stop, which seems to track the index nicely. The index put a new high in May. Most of the dry shipping stocks did not make a new high from the October peak. The index looks to be heading back down. I would think shipping costs would be going off the chart with the high oil prices. This index is very sensitive to economic activity in China, which is perhaps not as robust as all the hype would suggest, at least short term.