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Today’s stock market is turning out the way I expected

As of 2:20 pm, at the time of this writing, the SPY is up 1.2% and IWM is up 0.5%, with VIX down 16.7%.

Yesterday I made a post about how I expected a rally off of the sell off that took place in the market.

The rally has been quite strong today, and I think it could continue into tomorrow as well.

Why did I think the market would rally?

SPY and IWM were heavily sold off yesterday. If you use RSI, you can see that it was entering heavily oversold territory on the intraday charts.

Markets tend to rebound off of big moves, and yesterday was a large gap down and a slow bleed off throughout the rest of the day.

Today’s rally was a relief rally, or an opportunity for investors to take a breather and see where we go from here.

Was this the dip to buy?

I don’t think so. I think the market will continue to move lower over the next few weeks, with whipsaw days occurring during that time period.

If you’re a day trader or a swing trader, you could find some opportunities in long positions, as long as you keep your stop loss exits pretty strict. If you’re looking for good long-term investments, this isn’t the dip to buy quite yet.

Didn’t you say volatility would explode yesterday?

I thought it was possible, given the news about the US accusing China of currency manipulation, coupled with the futures selling off 1.5% in the opening minutes yesterday evening. However, the futures markets quickly rebounded off those lows, and a test of these locals didn’t seem likely today.

I do still believe there is the potential for volatility to explode given the political backdrop. Tariffs, trade negotiations, Yuan devaluation, dumping of treasuries by China, and their ripple effects all pose a risk for this market right now. VIX could explode. If you play a volatility play, keep it very small (NNT’s barbell approach).

 

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Author: Trader Court

CPA first, pivoted to python programmer focused on data science which I apply to my own stock and options trading.

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