As hoped for, the period of peak volatility has passed ( for now) and stock prices have bounced off their panic lows.  We witnessed some genuine capitulation as some daily price bars showed extreme intraday fluctuations, falling to new lows only to close near the opening prices.  As we’ve discussed, such price bars are a major sign of exhaustive selling and create opportunities for nimble traders.  Once a low has been printed, it forms the logical placement of a stop which is not just a random guess.

Naturally, the rebound path has not been equal for every issue.  Below, we can observe the extent of the bounce in the main indices thus far as well as a selection of high profile stocks.  From this view, we can determine in which area money is flowing back into markets. This will allow us to zero on on those sectors and companies that should continue to outperform in the period ahead.  We’ve shown the fibonacci retracement levels anticipated as thresholds to pay attention to as markets rise, but also note that in many cases, prices have come up to near the level of the first selloff before prices went lower yet again.  This is significant because those who were unable or unwilling to sell at these points may return to sell their positions, a classic supply dynamic.

It may be a bit surprising to observe that the Dow has almost reached the 38% retracement area whereas the Nasdaq related QQQ has not.  AAPL and MSFT have tracked the Dow as you would expect but we notice they are bumping against old supply levels. As we’ve pointed out INTC has performed well and is pushing towards 50%.

Below we show the relative price swings of select financial sector issues, BAC and GS. They are conspicuously weaker than the retracements made by the overall market.

Finally, we show a chart of NVDA, one of the most powerful stocks during the prolonged market advance.  Even with the selloff, this stock has managed to recover 62% of the selloff, an impressive show of strength and accordingly should continue to attract investment going forward.