The question is of course 'where do we go from here?'
The reversal pattern was obvious everywhere, but I will only post the few Figures below.
With many other ETFs, ARKK points to a reversal as this ETF had been under pressure and is now way oversold.
The small caps also point to a reversal from a support level that dates back to January 2021.
It is however strange to also see defensive stocks being bought here. This is probably because of a possible reversal in the Treasuries...
We can see that the Reverse Repo operations tend to also increase here, indicating that the Fed does not want rates pushing much higher in the secondary markets.
There are however a few Red flags that tend to point to a possible failure of the bounce.
First, we can see that not much money moved into the NQ8 stocks yesterday. This tells that funds first did not really short the mammoth stocks, but also that no new money has been attracted by lower prices on the NQ8 stocks. Yesterday's move was concentrating on mid-sized stocks that had been heavily sold/shorted in the past days.
The second negative was the still weak Cumulative Tick. This tells that there was not much participation of many small caps.
Furthermore, the New-highs-new-lows drastically decreased yesterday. This indicates that more stocks reached a new low yesterday. This is not what we might expect in a healthy bounce.
Conclusions:
Based on the above evidence, I believe that this bounce might fail. I would look at the resistance zone around $4730 on the $SPX.
We hence are set for a longer term risk-off situation.
On the other hand, there might still be some opportunities.
ZNGA for example was bought yesterday.
I featured it in a comment of December 30:
http://www.effectivevolume.com/conte...cember-31-2021
We can see that most stocks that were featured as possible longs in that December 30 comment fell early in January together with the rest of the market. This is why I did not purchase ZNGA: the market had been in a risk-off situation.
However, I sold cash covered puts in weakness as well as calls against my BCRX long positions since I wanted to keep the BCRX stocks during the market weakness. Yesterday, BCRX announced good news and the stock gained 30%, which forced me to repurchase the sold calls. This market surely is not easy.
