Tuesday Turn-a-Round

Today was another classic Tuesday reversal. After a lower open and a drive down into new recent low territory, and a disappointment that the Fed didn’t lower interest rates as Fed Fund Futures indicated that they would, the stock indexes were able to move higher on the day. The 24 hour futures chart shows a nice bullish hammer candle on the S&P futures. The day session charts show a large range candle up, with volume increasing on the decline yesterday, and increasing further on the rebound today. Trends are still clearly down, as is the advance/decline ratio. With my contrarian nature, and trying to find some reason look for a rally, I show the above chart of the Nasdaq etf chart. The dashed red line is drawn from a low area from last march. The low of the Nasdaq today was able to bounce off that area, at least for now. The S&P is still below that March low area. There was also a mildly bullish inverse head and shoulders formation on the momentum indicator, as indicated by the green line. This isn’t much to go on, but it is all I see at the moment.

I might be grasping at straws, but another potential bullish indication is the above chart of Berkshire Hathaway stock. It is interesting that as the market fell apart yesterday, BRK managed to close higher. And that was the third up candle in a row. The trend had turned up and momentum turned back up with a divergent pattern as prices were trying to make a double bottom. Today the stock extended higher with a wide range bar. Sometimes when the market gets washed out, this stock will defy the downtrend and move higher. Buffett is sitting on tons of cash and will put it to work when he perceives value. He must think there is value at these levels.

One thought on “Tuesday Turn-a-Round

  1. Hi Doug, very interesting post I think. You are right, the trend is definitely down but looking at the daily chart for the ES, yesterday’s hammer is similar to that of 23rd January which prefigured a nice rally. Also, the volume yesterday at nearly 5 million was even bigger than on that day.

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