A little pullback is all we really ever needed to widen out the lateral footprint of a base to bounce us higher, again as I have said since last week this isn't a game changer, it's a normal oversold (by way of breadth, not indicators) bounce, but they can be quite strong even though the last two bounce attempts were sold on any price strength almost immediately and were actually the first time in years I've seen them so weak. However as show last night, despite the market percentage gain, there was very little improvement in breadth and as I said last night, to my view of thinking, this isn't a correction based on price, it's a correction based on how many stocks are sitting near their 40-50-day moving averages or right below which as we know from using it as a concept, often creates a strong counter trend move in the opposite direction on a correction.
There are some assets that I'll be taking a second look at now that the base is wider and considering whether I want to add anything like FAS (3x long financials) for a short term bounce, but the standard is still high and the trade has to stand on its own feet, not just be a "bounce" trade.
Still the bigger picture with the market continuing to deteriorate in nearly every aspect is the ability to use short term strength for longer term position entries or add to positions.
Here's what the SPY looks like after just a small pullback, a lot sturdier of a base than yesterday.
SPY 3 min, note the inverse H&S-like look to the base now. The divergence looks good as well.
The 5 min chart's divergence has held up well.
And there are some longer timeframe divergences like the 10 min above and 15 min below.
15 min SPY.
I feel a bit better about a bounce that is worth trading or at least worthy of the call positions opened last week (IWM Aug 8th $110.50 calls) which are starting to do pretty good.
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