The news commonly headlines with the Dow, but SPX is my monitor for the market. 500 stocks are a much better measure of the market’s health than 30 stocks. SPX closed today at 2656, up 36 points, and the VIX declined 3.5 points to close at 25.6% - two reassuring signs.
SPX gapped open higher at the opening this morning and that is a very bullish sign. But we have been whipsawed back and forth by this market for the past several trading sessions. I watched the screen carefully this afternoon, wondering if we would see another rapid sell-off as we approached the close. But we retained most of today's gains into the close.
Another positive in today’s market was the weakness this morning. After a positive open, the market dipped around 10:30 am ET, but SPX did not reach Friday’s close. Then the bulls took control once again and continued to drive the balance of today’s trading session.
Friday’s price action was also a positive sign for this market. SPX broke its 200 dma at 2539 briefly, but then strongly rebounded over 81 points to close at 2620.
Have we reached bottom? That seems to be the question of the past several days. It is early to be sure, but these signs suggest we are close:
1. Friday’s strong recovery after hitting the 200 dma.
2. This morning’s gap up opening.
3. A successful recovery by the bulls this morning.
4. A declining VIX.
I began to collect a series of stock trade candidates today in preparation for putting some cash to work in the next few days. I found 15 stocks that have met two principal criteria: 1) They didn’t decline far during this correction, and 2) They were trading higher today. In one case, the stock is already teasing its high before the correction. I will be selecting trades from this group for Dr. Duke’s Trading Group over the next few days.