The futures are up this morning and now the questions are: Will there be a bounce? If so, what will be the magnitude and duration of the move? Would a bounce be sold or could it gain momentum and establish a higher low on the major market index charts?
These questions will be easy to answer in about a month, but in the meantime watch the charts for clues. After sharp prolonged moves oscillators get pinned in overbought or oversold zones and indicators that use an averages of their data, take time to catch-up to the real-time price action. Price action, then, around previous areas of supply and demand becomes the primary technical tool. This limits the amount of information traders have to make decisions and so, times like these require additional levels of caution and patience.
I’m looking at the 20 day moving average centerline on the Dow Jones Industrial Average chart and the 5900 area, where the first eveningstar pattern formed this month, as important upside levels for the index.
