The S&P 500 exhibited impressive action today on news of a stronger than expected September jobs report. Heavy buying came in with the 200-day moving average not too far below. The $4,250 range was also close by, which is an area that I've been monitoring closely over the last month. I placed an order on SPY last week as believed there was a solid opportunity in terms of risk to reward. I added to my position near today's close as volume came in on above-average levels.
The weekly charts on both the S&P 500 and the Nasdaq Composite show that the most recent lows undercut the prior lows. In my opinion, this is a positive occurrence as these types of moves often shake out weak hands. Some continued right side development would be positive in my opinion and would be similar to the action that took place after the 1990 bear market.
While bottoms often occur in October, it would not surprise me to see continued volatility over the coming weeks. The VIX did rally this week, but it could easily surpass those levels. It is important to remember that bottoming is a process rather than a one-time moment in time. This is why I prefer to scale into positions as I am doing with SPY rather than plowing in all at once. This allows me to get a feel for the market and to better manage my risk.
Risk right. Sit tight.
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Full Disclosure: I currently own SPY.
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