Snap Back Rally!

Stocks finally got the oversold bounce everyone has been waiting on. For the day, the Dow (chart) finished up 123.14, the Nasdaq (chart) +39.03, the S&P 500 (chart) +16.04 and the Russell 2000 (chart) closed up 14.45. This type of rally should be expected considering the incessant selling pressure that the markets have experienced over the past six weeks.

The real test will be in the coming days as to whether or not this was just a relief rally or indeed the correction we have all heard about. This is the million dollar question and a debate that the bulls and bears continue to have. I think it’s important to note that the key indexes got close to their 200-day moving averages but did not truly test them. For a text book correction, these levels represent the 10% maxim which must be tested and hold. That being said, it is not completely necessary for the indexes or a given equity to experience 10% correction before the resumption of an uptrend, however, most market technicans would view that event as the true reversal of the most recent downtrend the markets have been in.

All the best,