Double Bottom, or Precursor to More Downside?

After another huge rate cut the expectation was that shorts would get squeezed again yesterday. Instead massive price failures occurred across the board as early morning strength was heavily sold into.

The question remains, has the SPY carved out a double bottom or was this week's bounce just the precursor to more downside?

The answer is it's not clear. The market is essentially range bound here.

The big news of this week is the selling taking place in the market leaders. Ag, steel, gold, and oil all have faced heavy distribution pressure this week. Moreover, as funds continue to unravel their positions (possibly to meet margin calls in their losers) the downside in these high flying sectors could become fast and furious.

While we are recommending a cash position as a whole today, traders might wish to look for short entry points in the commodities sectors.

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Outlook:

The outlook is unclear. The market is range bound and until something breaks, day-to-day activity is only so much noise. Smart money doesn't bet on the direction of noise; there are no advantages in a random environment.