With the market coming down sharply over the past four days, we would be looking for a rally in the general market indexes as an opportunity to lay out positions in the inverse index ETFs mentioned in Wednesday's Dr. K Market Direction Model alert. As the NASDAQ has come down, it did show a "blue" day on Thursday which is due to the way Gil Morales codes his eSignal charts to show days where an index or stock gaps down at the open but closes above where it opened as blue, which is somewhat more constructive than if it gapped down on the open and closed lower than the opening gap-down price for the day, in which case it would color-code red. In this case, this is a subtle sign of support here at these levels where the NASDAQ Composite Index, shown below on a dailhy chart, found support on July 20th. Hence this is a "logical" area from which the market could rally, and we will be watching this rally carefully to see how it acts, assuming the indexes are able to bounce here. The other possbility is that the indexes simply burst through support on heavy volume and continue lower before they ever have a chance to rally from current levels. Optimally, however, if we were looking to enter inverse ETF positions, we would prefer to do so on a weak market rally off of these "logical" support areas, keeping in mind that the market does not often accomodate us with "logical" action!
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