The trend in bonds, as it is for interest rates, remains bearish. Bonds have a long way to go to rise back into an uptrend. Perhaps more importantly, interest rates could move into a trading range for a bit. Or, we could see a relief rally. Short-term, however, the panic is subsiding, rates are stabilizing, and this will allow the stock market to move forward into its final, 20-week cycle before the 18-month cycle correction kicks in. That is my best judgment.

I would expect to see profit-taking soon in Financials, Energy, and some of the cyclical/value sectors – with the funds rolled back into growth stocks. The NASDAQ 100 is most favored for this rotation, with the S&P 500 index capturing all sides of the coin.

I will expand this discussion considerably before the end of the day, but I wanted to get the signals out as soon as possible.

Day Trading Outlook

Gap rules are in play this morning, especially #2 and #4. As with any true gap, the early potential for a fade is there. You might short below the first one-minute low or on a retest of the open, should the opening drive be higher. In either scenario, it’s better if the overnight high is not taken out. Target the regular session high first on a short.

Crossing the overnight high on faster tempo and bullish internals would show potential for the market to move higher, confirming the overnight breakouts. As overnight inventory is skewed long but not 100% so, there is potential for this rally. Monitor closely for continuation.

Continue to watch where value develops. Over the last three sessions, it has been higher. A markedly lower value can change the current tone. Note that this will be harder to do once all majors have crossed downtrend lines.

A.F. Thornton