The market finally had a great day. It opened strongly and even gained momentum going into the close. As I said in yesterday's blog, the market has been extremely oversold and due for a bounce.Many of the market indicators I follow have now turned up. To add to that, we have the "bullish hammer candlestick formation" mentioned yesterday, as well as a double bottom put in at the 1040 area. Technically the outlook has improved significantly.
Even with the sudden positive change in sentiment, I plan to proceed causiously: as I often say, one day does not make a trend.
None the less, due to the strong market action, I did liquidate our US Dollar Index ETF (UUP). UUP is generally considered defensive and, more often than not, moves inversely to stocks. I also took a 5% position in the S&P 500 index ETF, SPY. If an uptrend develops, I will add more equity positions. If, on the other hand, the 1040 support level does not hold, we should expect more downside.
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