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Is selling over? Should you trade this market?

Futures are down again at the opening. It can mean nothing yet. We can see the market improve significantly overnight and we may see a rally.

Some traders and investors are asking whether it is already time to start buying calls or selling puts. They are expecting the market to reverse. Yes we are oversold, the trend is moving down below the Bollinger Bands which means we are in a buying zone.

 
SPX
 

As you can see on the chart above, the Friday’s trading was already below the lower Bollinger Band (that tiny little line pointing down as of now). That doesn’t mean that we are done with selling. The market can stay there for a prolonged period of time. It can be there longer than we may like, then I might like and longer that we may stay solvent.

 
SPX
 

Even if selling is really at its end and we may finally see a green day as a trader I would stay away. If this is really an end, you need confirmation. We need to see that we are really at the end of selling and that bulls are willing to step in and start buying.

None of that is visible in the market. None of that is happening. We may see more selling and we may see this market to stop at 1880-ish level.

If however we draw a line connecting last August lows, we can see that we really may be seeing the end of this selling. But do not get fooled. We still need to see that bounce and confirmation that we will see a relief rally.

 
SPX
 

If you are a trader, do not jump the gun yet. It may be early and it may be costly.

If you are a long term dividend investor, it is a perfect time to start initiating new positions but do not invest all your money yet. We may see a bounce only with more selling yet to come. If that happens, you can get better prices.

Nevertheless, this is a bear market and there is nothing yet which can change it. Coming earnings season is expected to be in recession, if coming data will be worse than expected, expect more selling. Only if earnings season will come with good numbers this bear market can be stopped.

 

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