Wednesday, September 23, 2009

Buy the Dip?

Well it was a crazy day on Wall Street as the Fed Statement gave us an initial pop but subsequent drop into the close. The move down in the last hour was ugly and surprised me. The candle we formed today was a textbook outside reversal which usually gives you a few days of follow-thru the downside in this situation.

You have to remember the SPX is up about 90 points in 3 weeks from top to bottom and the rubber band is a bit stretched at this point. Markets usually mean revert to a sense of normalcy. Today's reversal merely brought us back to within a few points of the 8ema on the daily. I would expect the markets to test the 20ema as we get a potential multi-day dip here.

A 50% retracement of the move up since early Sept is 1034 and that area is also the site of some good support so I would not be surprised to see this area tested before the bulls come back into charge. I think this will be a great area to scoop up some more longs and buy the dip. Ultimately, I do think this market continues higher. But we will watch and determine that accordingly. For now the dollar could likely bounce a bit and commodities pullback, which further pressures stocks.

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