MARKET COMMENTARY

Yesterday, I have indicated that the markets are in the diverging from the technical indicators. That would be sign for technical rebound. If the futures markets are any indication, we will see the much awaited rebound today. My hope is that the market will continue to rally for a couple more days. This is not because I would like to profit from the bullish move, but to give me a better entry point to sell short later. Don’t forget, we do not know how long is the rally going to last. It could surprise us with losses.

The Dow chart shows clear divergence between price and indicators. The rebound that is likely to occur on Tuesday should be strong. Do watch out for surprise reversal just as those happened in the last couple of weeks. An orderly rebound is healthy and allows us to take short position more easily later. If this is the case, watch for the reversal near 20-day moving average.

I think the bottom of United States Oil (USO) has been reached. This is a relatively strong support. Though it does not prevent the ETF from breaking it later, a rebound at this level is timely. But do not buy any call option yet. The ETF is still in a bearish trend.

DJIA Daily Chart

If anyone wants to go long or to buy call options hoping to catch rebound for a quick profit, RUT is a better index to bet on. It has sunk deeper than other indexes and is more volatile. Rebound can be strong. Think about it

RUT Daily Chart

The Unites States Oil chart, too, is poised for rebound. This chart is rather unique in that it has been very steadily declining. I am trying to catch the breakout of the trend line.

USO Daily Chart

STOCKS TO WATCH:

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