Follow-Through Friday – How Low Can We Go?
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
That's the only word we can use to describe this SPY chart (David Fry's) and, of course, all the other charts as well as we are now approaching our August lows but STILL nowhere near where we were in June (SPY $125, S&P 1,266), when we were down another 10% from here.
Back in late May, our big worry was Europe and the Euro was way down at $1.24 and Greece and Spain both looked like they were about to collapse and the Dollar was 83.50 and TLT was $129 and the VIX was at 27 – now THAT's a panic!
At the time I said: "If it wasn't for bad news, Europe would have no news at all" and, in the May 30th post, as we fell to our lows, I called the turn saying:
Meanwhile, on the US side, we're getting worry fatigue and we're ready to rally – as was made clear by yesterday's bullish action which took us over our weak bounce levels, which actually held up for the day. Now we'll get a proper test this morning as we had a nice sell-off in the Futures but we flipped bullish on oil (/CL) already in the Futures as it tested the $89 line and, of course, we closed yesterday out bullish as our weak bounce levels held up which means the weakness in the Futures is hopefully just a flush – to clear out the weak hands ahead of a proper bounce.
Why be bullish? Well, aside from the technicals per our 5% Rule, there's also the Stock Market Theory of relativity which states – if the World went completely to Hell and everything was destroyed in a storm of fire and brimstone – there would be a market for brimstone futures a day later (see "Christmas Time in Hell" for perspective).
Well, now we're down from overbought to oversold levels and SOMETHING is