You Call That a Bounce?
16th July 2008
It was a big day for the stock market with gains of more than 2% for the DJIA, SP 500, Nasdaq, and any other index they can come up with. OK, there was some good news, like a good oil inventory report that led to a $4.00 fall in the price of a barrel of oil, but what about the fact that consumer prices increased at the fastest pace since the early 80’s? That was back in the days when you could get a mortgage at 16 1/2 % and be happy you got it. (Yes, you read that correctly 16 1/2 % was what I was paying on my first mortgage). Like Uncle Ben and the FED boys said recently, maybe its time they started worrying about inflation a little.
Yes, that was a Bullish Engulfing candlestick pattern on the DJIA and the SP 500, in a down trend, near support, but there was one big problem - a lack of volume. Now I will not deny that it could be the start of a nice bounce, but it looked a lot more like short covering to me. Since the market is extremely oversold, even the staunchest bears were probably taking some profits. What makes this advance even more suspect is the fact that futures traders took the SP500 down further in the 15 minutes of after market trading, than they pushed it up in the last 15 minutes that the stock market was open.
Certainly does not make me optimistic that this market has turned around. Let’s see if we get any follow through.
JD