Had I blogged near the close on Friday that members should scoop up stocks with both hands as the bell approached, I likely would have been written off as a nut job. And as I wrote over the weekend, Friday’s big volume outside reversal on the NASDAQ Composite Index looked like a train I wasn’t willing to stand in front of.
While it would have certainly sounded crazy at the time, buying stocks at the close on Friday would have been the counter-intuitively optimal move going into a weekend where Chinese markets were expected to gap down big when they re-opened on Sunday afternoon our time.
Because once the Chinese Central Bank announced that it would inject a trillion yuan into its markets on Sunday, that was all the U.S. futures needed to begin rallying Sunday night. Another 500-billion-yuan injection kept the party going into Tuesday, where the NASDAQ launched 2.1%. It continued into this morning with a big futures gap-up that ended with the index closing below its opening levels as it churned on slightly higher volume.
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