It was another wild ride on Wall Street yesterday. Stocks stumbled hard out of the gate, following the lead of most global markets. By 11:00am EST, the DJIA was down more than 500 points, had broken below the October lows, and appeared to be heading toward the next important level on the charts - the February lows.
In fact, the S&P 500 wound up testing the closing lows of early February and April. The financials led the way lower as the action in many of the nation's largest banks was horrid. And the transports were busy exploring new lows for the cycle, causing folks to begin talking about the Dow Theory again.
Then came a small bounce, which was immediately tested with another sell program. For a change, the lows of the day held. After half an hour of sideways action, an actual rally ensued that would wind up erasing the day's losses. And by the time the closing bell rang, the major indices sported small gains. So, as I wrote last week, All's Well That Ends Well, Right?
Why The Turn?
The question of the day, of course, is, why did the market turn? Sure, stocks were very oversold and investor sentiment had become dour as just about everybody on the planet was now calling for another big drop in the stock market. Thus, the table was set for the bulls to get back in the game. But, as is usually the case, a trigger was needed to get things moving the other direction.
In this case, the "trigger" appeared to be several headlines, which when combined were enough for the programs to flip from sell to buy, for the shorts to cover, and for traders to jump in for another "ride the range" opportunity.