Stock Market -- Technical

The normal admonition is to say beware of spike bottoms, as
long term history shows they hold up no more than 50% of the
time in bull markets. Yet, this cyclical advance has relished spike
bottoms, so traders need to have that fact in mind.

The sharp decline in the market last week wiped out the over-
boughts across the time spectrum and left the market deeply
oversold on a short term basis. The deep sell-off ended abruptly
but started gradually enough to provide trade worthy shorts
which should have been covered on Friday.

As we moved into this week, I found I no longer had a firm technical
case for urging caution as much of the excess was wrung out in
sudden fashion.

This week the market has rallied sharply from a deep short term
oversold up to neutral. The market is in a confirmed short term
downtrend, but has been strong enough this week to make it
reasonable to expect a test of the short term downtrend line, which
if breached on the upside, would be a preliminary signal that a
positive reversal might be in order.

I did have a short position coming into last week's decline. That
position was closed on 5/7. I have not jumped into the market
on the long side and will probably look to see whether there is a
confirmed positive short term reversal before coming off the
sidelines.

I have to warn that I am now charting off closing prices as
I am unclear as to how much of the tape on Thursday, May 6 will
turn out to involve broken and hence phantom trades. Chart.