By Nicholas Santiago on July 6th, 2010 11:35am Eastern Time
As we all know the major market indexes have been crushed as of late. This recent move lower in the stock market has been the sharpest of the corrections since the March 2009 low. Today the major indexes are all trading sharply higher as relief from the Asian markets last night is helping as a catalyst. The point is that these markets are oversold across the world. A bounce from these levels on the major index charts is certainly possible. The SPDR S&P 500 ETF (NYSE:SPY), and the Powershares QQQ Trust (NASDAQ:QQQQ) are both trading higher by more than 1.5 percent.
Often when markets or stocks have been beaten down for several weeks and gap higher the next trading day that move higher is likely to be a real advance. The key is to see if the low can hold for a few days. Should the low hold the market is likely to chop higher and form a short term relief rally. This may certainly sound like a tall order with all the negative news that is surrounding the markets these days. Should a short squeeze come into this market a much further advance is possible.
Today the leading stocks that are trading higher are United States Steel Corp (NYSE:X), Freeport McMoRan Copper & Gold (NYSE:FCX), and Exxon Mobil Corp (NYSE:XOM). When these stocks move in tandem together the market will usually trade with them. Should these commodity leaders fail to hold up then the markets could decline.
Often when the markets gap higher after a major multi-week decline then a gap higher open has a fair chance of holding up for a while. The market is still facing major headwinds and that should not be overlooked. The key is to watch the close of the session and to see where the markets finish when the closing bell rings. A strong close could lead to more upside in the near term. At this point traders and investors must take it one day at a time.
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