Stock indexes attempted to rebound from what was becoming an oversold condition. The Nasdaq 100, shown here with the QQQQ etf, tried to reject the spike low from July 15th. The open of the day session was right on that low and price tried to move lower. After spending some time in that new low area, prices started to reject the new low and a move began to retrace back into the lows of yesterday. Prices weren’t able to close into the candle from yesterday, but at least there was a tail left with at least a temporary rejection of the lows.
The S&P 500 chart, shows to the right using the SPT etf, has so far not been able to take out the July 15th low, but it did test the July 28th low in a similar fashion. The open of the day session was right on that low, prices tested lower, and then rejected those lows to close higher for the day, and slightly into the range left on the bar on Thursday. The S&P situation looks a bit more hopeful than that of the Nasdaq. The higher close creates a bullish hook, and the momentum indicator is now just at the oversold line and setting up for a possible divergence.
After such a large downtrend in the stock indexes is would be reasonable to expect some sort of bounce here. Sentiment has gotten very negative and conditions seem ripe for a counter-trend move. But usually downmoves of this extent don’t create V shaped bottoms and new uptrends. I would think that if an upmove should occur it would create a good potential short if prices can get back up into the moving average area. In the case of the Nasdaq 100, that area is quite a ways overhead. If a recovery rally should occur, it would be important to watch volume to see if it dries up on the rise. Volume did increase on this drop, but still not near the levels of the drop in the June/July period.
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