Well, the media’s definitely going to be scrambling to come up with some sort of reason to peg on the rollercoaster ride the market took us on today. After a frenzied start, an early afternoon sell-off took us well into negative territory, but a burst of short-covering took shape just as the final hour got under way, which in the end allowed the major indices to finish the day with solid gains.
Certainly, the news flow today will be picked apart, with the positive durable goods orders report, the rise in mortgage applications and the uptick in new home sales being used as explanations for the early rally, while the poor Treasury note auction will be blamed for the early afternoon drop. However, one look at important technical levels in the S&P 500 tells the tale. Stocks reversed after that index was unable to move past the descending resistance trendline that’s been in place since October, but the shorts ended up getting smoked just as it pulled back to its 50 day moving average.
In the end, though, it was a pretty productive day for the market. These wide intraday swings might be difficult to navigate and are exceedingly frustrating to those who are starting to look for opportunities to put their capital to work, but they are helping the market digest its recent gains. The wild pops give short-termers the chance to book some gains, while the swift dips allow stronger hands to buy weakness. In the process, though, it’s important for technical levels to hold, and we did get to see that today.