Trader Mike's Notes
One of my favorite setups— a gap fill a few days after a big earnings gap up. We’ve even got a bullish doji, an NR7 and a Calm After Storm today.
While looking at the Non-ADX 1,2,3,4 Pullback scan tonight I could help but notice how many bank stocks are in the results. WFC, like many of the other banks, looks like it's simply had a normal pullback. It made a hammer-like candle right at its 20-day moving average today. I'll definitely be paying attention to the financials for the next several weeks.
This is more a broad market note than an S&P 500 one. We got an impressive intraday reversal today from very oversold levels. I posted an article (in the sidebar) about the McClellan Oscillator today reaching the lowest level since 1995. It really felt like some (hedge?) funds were blowing up today and just puking up stocks.
SPY, for its part, found support at its October lows. It, like all the other indices has been sliding down its lower Bollinger Band for a few days now. The trend table (on the General Market Overview page ) is almost all red. While that is obviously negative, when it's all read like this we're usually at the point where sentiment has swung too far to the bearish side. (The opposite is also true when it's all green!)
A continued bounce here wouldn't surprise me but remember that we've got the Federal Reserve meeting on Wednesday and earnings season is about to heat up. Be careful out there!
How things have changed since my last IWM note in early November. While the larger cap indices have barely budged this is down about 11% and market breadth (% of stocks above their 50 day moving averages) is the worst in several months. Those breadth levels alone make me think we're close to a bottoming / flush out kind of move. If the larger caps sell off we'd quickly be at sub-10% of stocks above their 50 DMAs... those are blood in the streets levels where you'd have to hold your nose & buy.
Tesla had its second bounce in 4 days off of the psychologically important 1,000 level. It's a bit oversold in the intermediate term, so it could certainly bounce a bit. I'm more concerned about if it can climb back above the 1,100 level. My guess is that it will make a lower high, roll over and try to fill that gap at 900. Time will tell & I have no position for now.