Momentum begets momentum—selling, usually, leads to further selling. Yesterday sent a loud and clear warning to bears in US stocks: there is a lot of hidden bullish conviction. The rally was, statistically speaking, the least likely outcome following Tuesday’s decline, and the message of that decline demands attention.
Today, expect early consolidation, perhaps extending through the day, as the market works to process recent swings. Do not fade an afternoon trend, particularly if it follows a tight early morning consolidation.
Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.