Why The Bounce Is Most Likely Not Over

Home / Leveraged Funds / Why The Bounce Is Most Likely Not Over
June 9, 2011

Today was a good start to the bounce. However, its not overwith. I’ve done some studying in my days and I’m going to compile some screenshots of the way I think the bounce could go. There are two ways this is going.

Possibility 1:
Today was enough to relieve conditions and we make one more new low. This is not what I think is going to happen, but its happened in the past. However, after that new low was made, the market went on a sustainable 2 week up move.

Possibility 2:
We have 1-2 more days of up movement that takes the indexes close or tests their 21dema’s from the underside. I am playing for this possibility. Today did not satisfy what I think should have happened. Therefore I am long all positions.

There are actually two more possibilities I see, but I think those two are most probable.

Couple the scenarios above with the backdrop that the weekly charts are severely oversold and came in starting this week semi-oversold, despite today’s mediocreness and the odds to me still say higher. Especially with most traders calling for a SPX in the 1270s. This is based on my own study of previous patterns. The one minor caveat is if the market is turning for the much worse, we are still likely to have that bounce, but it could be trickier and have a lag to it.