The Missing Bounce
On June 11th, when the XLF first approached the March low, it snapped back hard and rallied for three days in a vicious incineration of late-coming shorts. That bounce didn’t make a lot of sense because the BKX banking index had plunged through its March low previously. Why did anybody think the XLF would be different? Beats me, but we still had a lot of bottom-fishers at that time.
If you compare the current SPY chart to the XLF chart on June 11th, you will see that SPY’s bounce is being rather conspicuous in its absence. We should have had a strong bounce today. We should have had late-coming shorts running around in flames like you see in the movies. But it didn’t happen.
In fact, it looks like SPY was levitated solely by funds trying to get energy stocks onto their sheets before the quarter closed so that they could show their investors how smart they were this quarter. (Of course, if you look at the XLE chart, you will see that energy stocks are clearly being distributed as all the recent high-volume bars are red. So, don’t think that energy stocks will hold the market up going forward.)
It also appears that a lot of bears were keeping their powder dry until the quarter-end window-dressing was out of the way, and they rushed to get their short positions on before the close.
SPY’s bounce off of its March low has gone missing because traders have seen this movie before. The XLF bounce will not repeat because traders already know how such a bounce will turn out.
Bob Pisani kept telling us today how the beginning of July has historically almost always been positive, and that is certainly the case. But the beginning of this particular July is going to be tragic - for the bulls, that is.
June 30th, 2008 at 5:21 pm
hi Matt, I’m new to your blog. I have a question, how often do you update it ? Once a day after the market close, or do you periodically update during trading ?
thanks
June 30th, 2008 at 5:31 pm
Hi after,
I don’t have a set schedule, but I usually write a post after the close, and then maybe another one in the evening. I also tend to write a few posts on the weekend. If the market moves against me, you will see me writing more posts and making charts. If you check this blog before the market opens in the morning, you will know what I expect for the day. I’m usually too busy trading, or getting ready to trade, during the day, so I rarely post while the market is open.
Matt