An oversold bounce on Thursday but now what?

The oversold bounce was a nice relief yesterday, but difficult challenges lie ahead.  The DIA, and SPY, have a huge hill to climb through a thicket of thorny underbrush.  The IWM, well it’s looking up at a mountain covered in glacier ice!  The QQQ has the best chance of conquering price resistance having only a grassy foothill to mount.  The question is do the Bulls have the energy to climb on a Friday facing the uncertainty of the weekend.  Keep in mind that the Bears still have the advantage and run downhill much faster than anyone expects.  Wednesday was proof of that.  I suggest extreme caution as we head into the weekend.

On the Calendar

Only Fed Speakers grace the Economic Calendar today there are no economic reports scheduled to be released.  On the earnings Calendar, there are only 14 companies reporting today.  CPB and DE are among the most not worthy.

Action Plan

The Bulls did a pretty good job bouncing back from Wednesday’s lows, but we are not out of the woods by any means.  All the major indexes face the significant challenge of overhead price resistance price resistance.  With the market now facing the uncertainty of the weekend expecting the market to break through is asking a lot.  I’m not saying its impossible just unlikely.  As of right now, the futures are pointing to a positive open.

I’m not going to rule the possibility of adding new positions today, but if I will keep the size of the trades small if I pull the trigger.  Now I have to step over to the dark side and ask the question what if the market fails at resistance and starts back down?  What if we see selling into the close of the day?  As of now, I am ver comfortable with current holdings and willing to hold them through the weekend.  However, if the Bears begin to charge south, I will need to reevaluate that decision.  Selling into the close on a Friday often means new lows are in store for us next week.

Trade wisely,

Doug