I remembered a story from the book of "confession of a stock operator", before the guy wanted to buy the stock, he first sold 20,000 shares just to see how strong the buying were, once it is determined that the buying is real, he put in the big order...
Such is the way the stock market is operated. Trickery abound. Just like conducting a war, the tactics is as important as the strategy.
"All warfare is based on deception." Sun Tze said.
In that regard, it could be confirmed now that the rally of Monday from 2:00 to 3:00 p. m. may be just the trick the big traders lulling the small traders into believing Market is in the turning point.
Let's review where we are.
With today's downturn. the DJIA and SP 500 are still way from oversold. only NASDAQ are near the territory of oversold. VIX is around 25, abeit high, it is nowhere near the 30 in July or 35 in January or March. So, the selling may not be done yet.
There are sectors see more damages than others, but not the financial or the home builders, the sectors where the problem stems from and maybe the area to look for shorts. The sectors damagerd the most are the later darlings not long ago. the agribussiness, the dry shipping and technology (semiconductor especially) and of course, energy(oil, coal. solar -- green energy). We may see some rebound in the near future. especially in the oil market, but I doubt they will achive recent highs anytime soon.
The leading stocks are retails and consumer staples.
So, this begs question as what could lead the market higher? If the answer is that we do not know, then, we know this market is in deep trouble.
So, how do we know the market is close to bottom (never ending fun exerise I suppose), If we see VIX spike to over 30. and retail and consumer staples get hammered. and we may not far away from that point.
good luck
