A Key Reversal Day?

There is no doubt today is a bullish day. In technical chart analysis, today is a positive Key Reversal Day. I was trying to google the text book definition of the Key Reversal Day, but with no luck. Technicians seem to differ on several details of the definition.

The following chart from incrediblecharts shows intuitively what a Key Reversal Day looks like.


Regardless if today is a classic Key Reversal Day, this is what happened with SPX 500 today.

• Market went down 7 days in a row (well, with one up day in the middle) with SPX 500 registering a 15% loss before today.
• The index broke new low. In fact, SPX broke the intraday low of Oct 10th.
  
• The index closed higher than the intraday high of yesterday.
• The index closed at the high of the day.
• The volume went significantly higher.

Key Reversal Day carries a bullish implication, at least in short term basis. There is no guarantee that a Key Reversal Days will kick off a strong bull run. The rareness of the event combined with the context of the market indicate today could be the start of an intermediate bear market rally.

My previous post suggested a range bounded market until the early December to form the bases of a tradable bear market rally. I still hold that view. I am just a little surprised the re-test of the Oct low happened sooner than I thought.

In the next few days, we need to see constructive signs with market rising on higher volume and backing off on lower volume.

The next few charts supports the bullishness of the case.




VIX backs off from the trendline.



Jap Yen drops again and showing positive divergence.

In the charting landscape, things are looking much better than October. Leadership has expanded from medical to education, retail-discount, regional airlines, food, small banks (Well, can these industries be the real bull market leaders?????). If market can go side ways and more accumulations enter the market, the year end bear market rally is in the card.

The following picture is what I like market to do in the next few days ... Am I making predictions? Yes. Do I trade based on my predictions? NO. I trade on what I see/saw, I do not trade on what I think market will happen. I want the year end bear market rally BADLY (to make some money), that's all ... lol



Today, I do have a good long I am going to take. By the way, ENB short was closed today before market close with a little gain, I will reenter short once the bear market rally is over.

Going long tomorrow at market open: DLTR




Keep the position small, we still need to wait for the follow through day to confirm the rally.