After the recent lows hit on August 24th, we have been looking for a successful re-test of the bottom at about S&P500 1867. The market rallied off the lows almost immediately but rolled over again. It is normal to have to test the bottom a couple of times before feeling comfortable that the near term lows have been made.
The market tested the low again on September 29th falling to about S&P500 1872 or within 5 points of the correction low. The market bounced from there the next couple of days but, opened extremely weak on Friday after the jobs report. The DJIA was off 258 points early in the day but then reversed to close up 200 points. This was the best intraday reversal for the market in about four years. It is also a bullish sign that the market low on Friday was below the previous day’s low but, once it reversed, the high was higher than the previous day’s high.
The successful re-test of the August low followed by the reversal Friday is a strong indication that the bulls may be back. Today’s follow through buying is further evidence of improving market conditions.
Though the short term is harder to predict, we remain bullish intermediate to longer term and expect the market has the potential to be much higher by year end.