Toby Connor: With all the uncertainty in the world, and everything that could happen over the weekend, I think it’s safe to say that the market didn’t rally 22 points naturally to complete a swing low as we go into the weekend. When I saw the index futures turn from deeply oversold to positive as if by magic in the pre-market Friday morning I had a pretty good idea that the Fed was ready to put an end to this correction. By the end of the day it looks like they probably succeeded (at least for now).
Now the question becomes, since the Fed didn’t allow even a 38% retracement is this just a daily cycle low, or was that all we are going to get for an intermediate degree correction? Looking at the McClellan Oscillator this kind of powerful surge is usually indicative of an intermediate degree bottom. However, I’m not sure that’s going to be the case here.
If we consider that this correction was terminated prematurely then I suspect we are going to have to retest these lows in the coming weeks so what I think is likely to play out is a move back up to and maybe marginally above 2000, followed by another move down that at least retraces 38% of this intermediate rally.