MARKET COMMENTARY

Just as I had highlighted earlier, the market should rebound strongly when it bounced. This is because of an overstretched market. Basically, the market will bounce on any positive news, preferably major ones. The worldwide banking bailouts as well as the US direct fund injection to the US banks are really attractive news. This explained the bullish mood on Monday. Since the market is still buoyant with bullishness, there should be a follow-though rally on Tuesday.

However, do watch out for buying too much into the rally. The situation is still not bullish yet. The Monday’s rally was really a technical bearish rebound. It is still susceptible to crashes amid rallies. Furthermore, the rebound had not been accompanied by a higher volume; in fact, much lower than the day before. This rally can be short lived. As Jim Cramer of CNBC.com said, “Don’t trust the market.”

In the next few days, I would expect the pullback to return. Yes, another sell-off can occur. This could be the last round of sell-off before the return of stability to the market. Essentially, this action will shake off “weak” investors. Since you are visitor of this blog, you are actually in a different class of traders/investors. You should be in a position to learn how to capitalize on the wild swing of the market regardless of direction. At this time, do get ready to short the market again when the rally matures. Check the market reversal at the resistance levels of all major indexes.

Since the Dow had broken the 9,000 level, we should look forward to the 10,000, which should coincide with the 60% line of the RSI. Reversal normally takes place between 50-60% area. Of course, earlier reversal is possible and should be expected.

DJIA Daily Chart

The Russell made a nice rebound. Watch the resistance levels. Short it when a red bar appears near the resistance.

RUT Daily Chart

Nasdaq resistance should at the MA-20 line. This is where the reversal should occur. Yes, almost all index charts show the similar pattern.

NDX Daily Chart

STOCKS TO WATCH:

NIL

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