The recent selling spree in stocks has left most of the market quite oversold on a short-term basis, increasing the odds of at least a near-term bounce. However, oversold markets are capable of becoming more so, and it should be noted that market internals have been bearish, even after Monday's intraday reversal that lifted stocks into positive territory from a morning of sharp losses. New long positions entered yesterday afternoon or today should be carefully monitored until we see improved breadth readings with a strong close above the descending trendline off 2010 highs with convincing follow-through. I am coming into the session with a handful of longs after closing out my short positions mid-day Monday, but nothing aggressive at this stage of the game.
The S&P 500 has a channel that may be of interest and that I haven't noticed anyone calling attention to. The touch points are lining up beautifully, and it may bear watching.
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