Both the bears and the bulls had something to cheer about today. If you are bearish, the fact that markets ended in red even after an almost 300 point down day is impressive. If you are bullish, the facts that the markets pretty much went nowhere after the initial thrust downwards and ended well of the lows is something to be hopeful about. But make no mistake dear readers, the momentum lies very much much with the bears. That being said, we have three consecutive down days now in both S&P and Nasdaq, so it wouldn't be unreasonable to expect a bounce here.
The question is whether this bounce is a reversal or just a constructive breather for the bears. I suspect it might be the latter, so look out for any bounce being rejected right at the MA(50) or gap resistance, as that would be a signal to go short. Its interesting the NASDAQ has gapped down three days in a row now but the Nasdaq McClellan Oscillator is still not at oversold levels, meaning we still have potential for further downside in this move.
So, that is pretty much my strategy for tomorrow - ignore the noise and keep an eye on how the market deals with the important levels. A bounce could very well happen here, but be careful playing it. If you do play it, remember not to get too greedy in collecting profits! And remember if the market pretty much sits around here like it did for most of the day today, that action is bearish and not a sign of bulls making a comeback.
Take care and good luck!