Will the rally last?

June 29, 2006 · Print This Article

As I have stated over the past few days any directional move after the a Fed release has often been reversed within one to two days. Will it happen again? Given the current overbought state of three out of the four major indices coupled with the post-Fed reversal tendency, it looks like a short-term reversal is probable. As we all know nothing is definite, but we have to go with the probabilties and in the past this scenario has led to a short-term reprieve. Another bearish indicator is the VIX and it took an enormous hit today as it is once again nearing historic lows. It is still a few points away but after losing 45% since its high two weeks ago a bounce in the near future could be in the cards.

I must point out that we are entering a seasonally bullish period (beginning of the month) so the sustainability of a bearish move might be tough. Fortunately, we are not looking for a long-term move.

RSI Wilder (5) for June 29, 2006