Continue reading...The eagerly watched for retest (of the prior lows) finally came to fruition on Wednesday of last week. Although, the ER2 (Russell 2000) didn’t quite make it down far enough to touch the recent nadir. This was not the case for the S&P and the Dow. These two benchmarks actually exceeded their prior low points before the Bears finally decided that – enough was enough – and began covering or buying back their short positions. In addition, the market sell-off had gone far enough that the Bulls found a perceived "value area" in which they could put new money to work. This chain of events created a massive order imbalance that precipitated the violent reaction that is the rebound. Much like a rubber band that is stretched to its limit, the reverting is swift.
Was this an oversold bounce before the next shoe is to drop? Or is the correction over, thus setting the stage for a challenge of the February highs? These questions are foremost on the minds of both traders as well as investors.
Last edited by a moderator: