The Gilmo Report

August 16, 2017

August 16, 2017

The market seemed to be anticipating the softening of war-rhetoric emanating from North Korea by pulling a big futures led jack to the upside on Monday morning. As I wrote over the weekend, because of the NoKo news selling alibi, the market was susceptible to precisely this type of sudden upside relief rally.

This sent the NASDAQ Composite and S&P 500 Indexes flying back up through their 50-day moving averages on weak volume. This now gives us a chance to see whether last week’s selling was indeed alibied by the NoKo news. If we see the reaction rally reverse back to the downside, then we have a pretty good idea that last week’s selling was just the start of more to come.

Being an even-handed trader, I am of course willing to give the market a chance on either side, without taking a rigid bullish or bearish stance. However, I am having a hard time finding any compelling long situations outside of playing some short-term swing-trades on bounces.

Today’s action in the NASDAQ also may have confirmed that institutions are again selling into the rally as it stalled on higher volume, which is a type of distribution. The index did manage, however, to hold above its 20-day exponential moving average, but a breach of that line might infer that another test of the 50-day line is coming.

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