What we can make out of today’s market action
The volatile market today can tell us a lot about where we might go in the future. The entire day of trading was entirely technical, though the one minute tick chart is largely unfilled due to the amount of volatility in the market. To show how the market moved today, we’ll look at the chart patterns and support and resistance as well as the RSI divergence occurring late in the day that all played a factor in today’s trading.
There were just two major trends in play throughout the entire day. Beginning early with a trend that moves downward for most of the day until 2:40 when the selling ends with the island reversal at the bottom of the chart then rallies considerably into another general trend. The interesting part though, is that the end of the day is marked with an RSI divergence. Tomorrow we might just see another sell off led from the general breakdown of the last trend of the day.
The latter part of the day brought all of the excitement. The island reversal was important but was almost met with news that the central banks all over the world would come together to globally lower interest rates and provide liquidity to the short term credit markets. This vow was seen as something that could coincide with the bailout by first ridding banks of bad debt and then enticing them to lend with extremely cheap interest rates. The problem is, this is the exact same way we tried to talk ourselves out of the last problem, when Greenspan took rates to 1% to bump the stock market and created the gigantic credit bubble that we’re seeing today.
None the less I’m looking for a lower open price tomorrow. The RSI divergence at the end of the chat gives me an idea that we’re heading south if the Federal Reserve doesn’t do something tonight. The low set today will work as a short term support but it won’t be long until we retest this low.
