Futures

Early check on the futures markets shows that the major indices are up 3-4% in early trading. This COULD be the intermediate-term bottom folks. We now have two major ingredients in place: 1) Very oversold conditions; 2) A "reversal" day (futures down big, gap down hard, rally into the close and close at high of day in positive territory)...it was almost perfect (indices closed slightly negative). We could now have the 3rd and final piece: A follow-through day (major accumulation day on heavy volume). If the futures remain up large, the gap open doesn't fall apart, and the markets stay strong until the close, this 3rd criterion will be fulfilled. That should lead to a nice 15-25% rally up until we meet heavy resistance at around 10,000-10,500 on the Dow. This is the area from which the markets went into free-fall and will also be where the decline 20 and 50 day moving averages will be located after the rally. Thus, this should only be a bounce within a primary down trend. In addition, there still could be extreme price swings in both directions given the unprecedented level of the volatility index (VIX- closed near 70 on Friday), so you may have to stomach big turns for the next several days. More cautious investors may want to let the dust settle some more before making sizable entries.

Happy trading and good luck!