I Smell A Stock Market Bounce: Here Is Why

The Yen is ripping higher as panic spreads through Japan. Fear is spreading in the stock market with stocks like Chevron Corporation CVX taking a pounding. Fears that the Federal Reserve will pull back on quantitative easing are everywhere yet the stock market is barely negative today. I smell a stock market bounce on the horizon. While short lived, the bias has to be for a bounce. Let me explain.

1. As explained above, the markets are holding up extremely well. This tells us of underlying buying on very solid volume today. There is institutional buying as retail is selling here. That is the reason why we have such big volume on the day but barely any downside.

2. Almost every index is trading into major support. For example, the SPDR S&P 500 ETF Trust SPY hit the 50 moving average on the daily chart.  In addition, the PowerShares QQQ Trust, Series 1 (ETF) QQQ is kissing the 50 moving average and a major gap fill on the daily chart.

While the markets may stay neutral to weaker today, these key factors tell us a bounce is nearing.

Gareth Soloway
InTheMoneyStocks.com<