Just time for another quick update, which comes two trading days after my previous post.
Sure enough, the engulfing candle I highlighted marked an end to the previous day’s one-day-wonder snapback.
As you can see, this chart goes back six months, covering the two most recent intermediate-term lows, on a reasonable amount of panic, as indicated by the volatility index, with momentum oscillating below it.
Friday posted an intra-day reversal to the upside, after setting a new low for the move. The reversal came on the highest volume since the prior intermediate-term lows. But, the VIX did not spike as high. Does it mean we need more fear before we get a tradable bear market rally? Or is the VIX not going to spike as high as the last two times, perhaps because people have built up a tolerance to the fear drug? Feel free to comment. Cheers!
PS: I did two 1-day trades last week, one that caught the bounce up, one the caught the engulfing down. Friday at the close I put on a tiny long for the fun of it.