That was nice!
In one day, we erased all of last week's losses and cleared the 200 dma before it had a chance to bend lower but, as you can see from Doug Short's chart, the 50 dma is already in decline and we have to do MUCH better than this to get back over that line and turn that frowning average upside down before we are able to say we're back on a long-term bullish path.
What we have so far is a 30-point, 2-day bounce on the S&P after a 16-day 105-point drop or, we could look at the post election day dip of 80 points over the previous 7 sessions and then 30 points back up is almost exactly that magical 40% retraces we'd be looking for and the short time-frame makes more sense that way.
Overall, we're looking for follow-through on this move, hopefully back to at least 1,400, which will take another 50% of yesterday's move to complete. As we noted yesterday, we were looking to make weak bounces to Dow 12,720, S&P 1,375, Nasdaq 2,900, NYSE 8,000 and Russell 790 and we made all of those targets so now we just need to hold them as we attack our strong bounce levels at Dow 12,950, S&P 1,400, Nasdaq 3,000, NYSE 8,100 and Russell 805. If we can't do that – it's not a real rally.
Dave Fry's Dollar chart shows how close the inverse relationship between stocks and the Dollar has been this Summer and Fall and we finally got the Dollar back below the 81 line yesterday, so of course we are rallying. It's not about the one-day rally but about what sticks once the variables calm down – and that remains to be seen.
Shorting oil off the $89 line (/CL) is working well this morning and we never quite got to $90 yesterday, which was a good sign for our bearish bets. The constant parade of "experts" on CNBC who say oil will fly back over $100 because Israel and Gaza are shooting at each other makes it hard to hold conviction on these bets but the bottom line is there is an insane amount of product in storage and very little demand – until and unless the supply is somehow actually disrupted (and this little skirmish simply won't do it) – our premise for…