Why buy into a short term reversal? I dont think we have a bottom unless the lows are retested in the near future.
To answer you and the other poster - it's mainly because we have widespread fear (as shown by the VIX and current headlines/rumours) and yet the market staged a sudden and powerful unexpected late-day rally. I've found that when price moves powerfully against strong prevailing sentiment, especially when that move is surprising, then the momentum is likely to continue over the short-term. At least it has been a good odds trade, according to my research & experience. It also has the advantage that if this is a "fake" move which is going to reverse, the risk seems small and we will almost certainly find out within 2-3 trading days if the trade is right or wrong. I like a trade with a close stop (the lows of yesterday), a clear & current timing signal. If I'm wrong then I'll find out quick and take a small loss, then stand aside and wait for the next signal to come along. Someone said they think daily highs & lows are effectively meaningless, well I have to disagree on that - at least when they are accompanied by sentiment extremes. P.S. Japan just had a reasonable intraday dip (about 300 points from high to low), then rallied strong into the close and recovered all of the losses to close up on the day. That kind of action - looking scary, then coming back surprisingly strong at the close, is a decent trading signal in my experience. You can even see it in one of the Market Wizard books - can't remember which guy it was, but he says if you are nervous about your position, get "tested" by the market action, then it reverses and goes your way strongly, then you should sit tight or increase your size, because chances are a lot of other traders felt nervous and puked out. That's what causes bottoms (and tops). Obviously there's no guarantees in the markets, but I think it's a good odds play to be long here. If right, the market should stay firm and go up further over the next 2-3 trading sessions. A 1% down day, or the market going nowhere by Friday, would cause me to exit half, and violating the lows would get me out of it all. So, all we can do now is wait and see how the market responds. But I've put my cards on the table and you'll know in a few days whether I got it right or wrong.
Agreed 100%. One almost gets the feeling that he ( as well as a few others ) are "paid" by the owners of ET to make these "cut and paste" and "CNBC Play by Play" posts so as to keep website activity up on ET. There is no value in these types of posts. Just pathetic. And yet the "mods" on ET don't seem to have any problem with it because they are allowed to continue to post this crap day-in, and day-out.