A Temporary Setback??

May 30, 2006 · Print This Article

After a short rally last week, the seasonally bearish post holiday blues hit the market and all four major indices participated. Last week, I mentioned a bearish reaction like we witnessed today was typical the trading session following the Memorial Day weekend. However, the bearish seasonality is typically short-lived as the seasonal picture for the rest of the week is historically quite bullish. There are a few other bullish biases that I mentioned in the last expiration report that will be working simultaneously with the seasonal picture. One, the markets are once again nearing oversold territory, a good indication today’s sharp decline doesn’t have much more room to move on the downside. Two, the VIX. I mentioned the VIX a few times over the past month (when it was hovering between 11-13). Well, the VIX moved 30.7% today. We haven’t seen a move like that in years. In most cases, a sizable move in the VIX is another bullish sign for the short-term.

Will the market respond favorably over the coming days. Is the bullish seasonal picture and its indicator cohorts enough to mover this market higher. Hmmm, chances are certainly in the bulls favor. Ultimately, I hate to say it, but only time will tell.

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