Major averages fell sharply again yesterday on lower but above average volume suggesting institutional selling. Both the S&P 500 and Dow Jones Industrials closed below their respective 200-day moving averages for the first time in months while the NASDAQ Composite spent its second day moving further below its 200-day line. However, all of these indexes have also undercut their May lows, putting them in a logical position for a reaction rally as the need to sell becomes obvious in the short-term.
Futures are up over 1% at the time of this writing as markets bounce after a high volume, institutionally driven sell off over the last two days. Part of the selling pressure may have been due to margin calls during and after Friday's collapse. Big uncertainty remains and markets detest uncertainty, thus the bounce may be short-lived. With political in-fighting in the UK on 3 million requesting another Brexit vote, and with 5 EU countries now seeking referendums of their own on whether to stay or leave the EU, expect continued heightened levels of volatility ahead.
We will be keeping a close eye as always on the price/volume action behind leading stocks on potential short-sale set ups or long positions. Both timing models stand at the ready.
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