If I Had a Hammer
7th February 2010
In spite of some improvement in the January unemployment report, it looked like the stock market was headed south for the winter on Friday morning. Then just before 2PM, the Nasdaq bounced strongly off of support at the 2100 level. The other major Indexes followed suit and the stock market actually turned in a positive day. This was a turn around the likes of which we have not seen since the SP 500 lead the market by bouncing off of the 666 level on March 6th, 2009.
Quite often, this Hammer candlestick pattern turns out to be a good reversal signal. While this might have been a great opportunity for a Bull Put Spread or a Bull Call Spread, we need to see some confirmation early this week to conclude that this market correction is over. If we do not get that, you should be ready to use the bounce to implement some bearish strategies.
JD
