Bounce or Reversal?

The stock market has been a one way sh$tshow since dropping out of consolidation in 2 weeks ago. It would not surprise anyone if it were to give a bounce, even a strong one any day. Coming back after Christmas the S&P 500 is about 15% below its 200 day SMA. It does not get that far stretched from the 200 day SMA, in either direction, very often. The last time was in 2008. It made it to 30% below then.

So is this move down set to continue to rival that drop? It could. In the pre-market trading Wednesday it is trading higher. The percent of stocks below their 200 day SMA comes into the day at extreme lows, under 11%. This level was lat seen during the 2011 correction. Yes there was a correction in 2011, and in 2016.

This also bodes well for a bounce. But it also supports a case for a reversal. It will take time for a reversal to happen and of course, it will start looking like a bounce. There will be a lot of bluster along the way. Opinions are cheap, including mine. Nobody knows what the market will do. All we can do is manage risk and participate…. or not. What will you be doing today?

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.