Just the week prior, most technical levels were penetrated on the downside resulting in talk of an impending crash and as a result, Volatility Indices exploded and stocks cratered.
And just like that, the bulls took back control of the Indices last week.
Now, please note that I specifically said Indices and not stocks as clearly this rebound, like many prior ones, has been of limited breadth.
So, in other words, a small sliver of the stock universe exhibited buying while the majority of stocks either continued to fall or just drifted aimlessly.
Basically the alarming lack of participation in last week's rally shows that most market participants don't trust this rebound and are worried about getting suckered should it peter out..like most of the recent ones have done.
Anyway, as it's not in the best use of our time and energy to speculate on what the markets have in store for us next week(As we can't see into the future..) all we can do is prepare for any number of scenarios.
- The rebound continues: At this point pullbacks might be a great place to enter should our filters trigger as they are chock full of stocks that are still down at least 30% from recent highs.
- The market starts of one of the days in rally mode only to reverse mid-day and 3 days later we're testing the lows again: In this case, we want to make sure that we're not caught long and as in the past few drops, we know how to capitalize on this scenario(See CVOL Alerts)
- The market continues to drift higher with the occasional violent mid-day drop only to rally right before the close): In this case we're prepared to find the strong stocks Du jour and carve out 3-7% profits.
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See everyone in the trenches of the markets........