[caption id="attachment_381" align="aligncenter" width="500" caption="S&P 500"][/caption]
The only thing for certain at this point in the market is that there're a lot of uncertainties. Notice the several big swing days near the October low but with open and close near each other (a.k.a. the doji's). Are we at the bottom yet? I don't know. Have we started a rally attempt this week? Definitely! Is it going to hold? My intuition says likely.
Why do I say that? Three reasons. Fundamentally, the joint effort by world central banks to inject billions of dollars into the capital market isn't going to be unnoticed. Secondly, the up days this week has been marked by some strong late-day climb across the market. This suggest the pros/smart money are buying. Thirdly, also notice the significant volume at the doji last Friday, when the market reached a new low. Subsequently, the decline in the last two days has been on much lower, and declining volume.
[caption id="attachment_370" align="aligncenter" width="500" caption="SPDR S&P 500"][/caption]
On the other hand, the fear and panic are still very much alive. Profit-taking will create some serious resistance going up. Also, the market has been very irrational lately, so any fundamental or technical analysis could very well be thrown out the window.
Bottom line is, I believe an intermediate term bull phrase is taking shape, yet be very cautious in your approach and use a conservative risk management approach. I am not going to repeat my errors from last month when I entered full long just before the biggest market crash of our generation.
: http://traderpau.files.wordpress.com/2008/10/spx.png : http://traderpau.files.wordpress.com/2008/10/2008-10-15-spy.png