Six Sessions, Five Positive Intraday Reversals: What the Bounces Tell Us
Monday's intraday recovery was even more impressive than last week's.
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Stock Market's Overhead Resistance Is Now More Powerful Than V-Shaped Bounces
There have been six market sessions since Operation Epic Fury was launched against Iran on February 28. On five of those sessions, the Nasdaq 100 (QQQ) closed substantially higher than it opened, and on one session, it was close to flat intraday.
Monday's intraday recovery was even more impressive than last week's. Many investors were in a panic as oil skyrocketed Sunday night, only to completely reverse course. Adding to the positive sentiment late in the day were comments by President Trump to CBS News that he was considering taking control of the Strait of Hormuz to open oil routes and that the war could be over soon. That helped push the indexes into slightly positive territory, breadth turned marginally positive, and the close came near the highs.
It is a favorable sign that buyers have consistently stepped up after overnight panic selling. There is clearly still an appetite for equities and a war, elevated oil prices, and AI uncertainty have not been enough to stop that appetite from reasserting itself.
What the Bounces Are Telling Us
Unfortunately, these big intraday bounces are not enough to improve the technical picture. The indexes are holding key support but they are still making lower lows without making higher highs. It is a very messy trading range made even messier by the rotational nature of the action, with different sectors moving counter to each other on an almost daily basis.
The good news is that the rotation does help individual charts develop. What traders really need before they can be more aggressive is a sustained trend. These intraday bounces are fine for day trading if that is your approach but they make it very difficult to establish position trades because the volatility will shake you out if stops are set too tight.
Investors felt considerably better at the close than they did at the open and that is a positive. News developments, both positive and negative, can hit at any time and the situation remains fluid. My view is that it is still too early for major buying but I did a couple of small nibbles in new names Monday.
Have a good evening. I'll see you Tuesday.
Related: As War Rages on in Iran, Oil Itself Takes Back Burner to These Concerns
At the time of publication, Rev Shark had no positions in any securities mentioned.
