Today is Wednesday August 25, 2010 and the market stopped the bleeding in a nice market reversal off of earlier weakness.

Today’s market reversal was pretty critical, as we saw a little more selling yesterday than I thought, but all is well. That is not what you would here on the news. I am sure everyone and their brother is bearish right now and understandable. I just can’t buy into that right now, which is very unpopular.

I would bet with the extra selling yesterday, the bears think that they have the upper hand and can smell blood. I hear a lot of talk about a market crash and the “Hindenburg Omen” and such, but I just don’t think it is going to happen just yet. As mentioned I could be wrong, so don’t base any big long term market decisions on my say so, this is just my opinion.

With that said, when a majority are calling for a direction move, it rarely happens when they expect. I will be looking for a rally on Thursday and Friday as I said last week. (“We would rally later in the week, Thursday & Friday”)  We needed to get through the early part of the week without falling apart and even though yesterdays market did move down more than I first thought, I can see why and where other support was coming in at now.  A little after the fact, but today I was looking for the market to hold and make a market reversal.   In fact I do still have the majority of it in a open position which I rarely ever do. The situation called for it, was my thought.  I am protected and have a stop in place, so it should work out pretty good either way.

One thing also to keep in mind is, we are coming up to an election in a few months and the current party does not want to give up control in the House and Senate. One would think this should not have anything to do the market, but to often it does in reality. I won’t speculate on how, you will just have to use your imagination, but if things fall apart right now, it will most likely translate into a big shift in the Washington power base. A stable or rising market will give them a fighting chance. I have seen this to many times over the years to know that there could be some connection.

I am looking for a move up to S&P futures 1100 or so in the next few sessions. So, we will all just have to wait and see what happens. Below is a chart of yesterdays first 90 minutes and I have a chart of today’s action, but it is pretty scrunched up. Its the only way I could get all the data in showing where I closed out a portion of my position at the top. I did have a couple of losses early on, but came back with a nice gain for +5.25 points and +12.75 points. I still have an open position as I mentioned earlier, but have a large profit built into my stop, so I should be good for further advances if they come. If I get a nice push on the open or in the night trading, this will make up for not trading the last week and half for sure. The charts below.

Good Trading to all.

P.S. will update all action and new market sentiment numbers in tomorrows update.

Related posts:

1. Bullish Sentiment backs off- Room to Rally
2. Market Needs More Time to Get Into Position
3. Market Sentiment Numbers Helped Take the Market Down
4. S&P and Dow in Position to Move Higher
5. Market Drops Off as Sentiment goes with it

Tags: Hindenburg Omen, market reversal