The Bounce From Oversold Survives An Early Test

AT40 = 22.0% of stocks are trading above their respective 40-day moving averages (DMAs) – ends an 11-day oversold period that followed a 4-day oversold period
AT200 = 31.6% of stocks are trading above their respective 200DMAs
VIX = 19.5
Short-term Trading Call: bullish

Commentary
If you are a long-term passive index investor, you can return to your regularly scheduled programming. Just make sure to check back in if the S&P 500 (SPY) manages to break down below the low of this latest selling cycle (around 2600). For those interested in short-term trades, the drama continues apace.

Friday was a day of spills and thrills as the headlines from another strong jobs report faded fast in the wake of the Trump administration broadcast conflicting messages about the prospects for an imminent trade deal with China.

via GIPHY

I was not aware of the headlines until after the close of trading; I am thankful I was not paying attention to that source of confusion and distraction. I was focused on executing my trading strategy for a market that I assume is moving away from oversold conditions and facing down its next challenges at 200-day moving averages (DMAs).

AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, closed at 22.0%, a slight gain over the previous day. AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, closed at 31.6%, essentially flat with the previous day. The S&P 500 (SPY) gapped up but sold off all the way below the intraday lows of the previous two trading days before bouncing back. Although the index netted a 0.6% loss, I call the day overall a small victory.

The S&P 500 (SPY) almost challenged its now declining 200DMA resistance. The 0.6% loss was not enough to drop the stock market back into oversold

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