Thursday, March 13, 2014

Why The Market Will Likely Bounce Tomorrow

The Market has had an ugly last few days, however there are some promising signs it will likely bounce tomorrow. The chart below shows the S&P 500 and $TRIN indicator (Arms Index). When $TRIN is above 2 it often marks a temporary bounce in the Market. The last 5 times (highlighted with dotted vertical blue lines) $TRIN was above 2, the Market bounced 4 times (80%).  The VIX also hints at signs that the Market might bounce tomorrow.  The VIX made a huge a 12% up move today. Often when the VIX closes near the high of the day and moved greater than 10%, it often pulls back the next day making it easier for the Market to move higher.

Tomorrow's bounce may just be a gap up and a fade, or just a pause before we go lower (in the coming days). Both scenarios temporary relieve the short term overbought VIX and the oversold levels of the TRIN indicator. However, ultimately the odds do favor the bulls for at least temporary relief for tomorrow.

S&P 500 arms index