The past week of price action has been typical of a shakeout. Fear has been prevalent, the AAII Sentiment Survey showed the lowest number of bulls since August of last year. The market is down more than 7% since the highs in early May. However, as the market continues to threaten to sell-off further, buyers have continued to step in over the past week to prevent a continued slide. Slightly lower lows following each sell-off have managed to shakeout the weak-handed longs. At the same time, the previous two days have seen capitulation-type volume. Odds suggest a strong reversal is imminent. If it does not begin today, I expect a significant rally within the next week.
I am currently long. Unless the S&P 500 breaks down below the March lows, I am a very confident bull. The markets may remain choppy until there is confirmed resolution on raising the US Debt ceiling (deadline is August 2), but regardless, we could see at least a 50 point rally (ES) in the near-term.
Friday, June 17, 2011
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