It is quite clear: we continue to be in a search for direction. In the big picture, that is from the perspective of long-term investors, it continues to be advisable to operate with reduced risk. In short-term trading, however, the most interesting opportunities are emerging right now. Over the weekend, we pointed out in our market commentary the uncertainty of the next direction of movement.
After sentiment and market timing had clearly indicated short-term opportunities at the beginning of last week, this advantage had already been realized and exhausted by the end of the week.
It is significantly easier to recognize the beginning of technical movements than their end. It has therefore proven effective to operate with fixed short time horizons and simply close the position again after one day, or to operate with an increasingly tight stop-loss at the first signs of uncertainty. Over the weekend, the clear advantage was over and therefore corresponding hedging measures were urgently advised.
As of today, however, we see the next opportunity:
After several days without a signal, short-term market timing has switched back to a buy signal. Yesterday's weak day was sufficient to push sentiment and positioning into a short-term exaggerated region that makes a recovery of 1 to 3 days likely. For the S&P 500, this triggered a buy signal last night at 4351.5 points for today.
However, the positioning not only suggests probably rising prices, but also increased volatility:
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The market's rubber bands are unusually stretchable on days like these. With downward phases as short as the current one, this stretchability is rarely fully exploited. In more volatile phases and crash situations, days like this are particularly extreme and frightening.
In the long term, it is difficult to make a statement at this point. The extreme trend of the summer months is broken, but a pause was urgently needed and healthy here. The market still has room for several more percent on the downside without problems to look around. However, the promising market timing makes a recovery to the 4430 area in the S&P likely for now.
Good luck in advance,
Your Lars Wißler from leeway.tech
