The Opportunity Presented Itself; Capitalize

The last four days have been pretty much the opposite of the “two steps forward, one step back” scenario I’ve previously suggested for equities. Yesterday, the SPX dropped below my Oversold condition of 1372 on the open and it was a gradual climb from the 10 AM lows into the closing bell.

SPX 60D OHLC Chart 20120423

My quantitative range is still rather narrow and both the short-term Overbought and Oversold conditions are now lower than where they were yesterday. After yesterday’s European-dominated headlines, the focus should shift back to the US–earnings and FOMC statement (tomorrow). We’ll see if market participants are satisfied with a relatively better situation domestically.

Either way, I think we’re due for a little VWAP bounce. If investors like what they hear from Apple (AAPL) after the bell today, I think it sets the stage for SPX 1390 by the end of the week. However, I’d rather lighten up on equities at 1377 than risk a quick one percent haircut. If you had been a buyer of equities yesterday, you should be able to net a percent at that level. I still think we make new yearly highs on the S&P 500 by mid-May, but that condition might be delayed by the contentious battle taking place between 1360-90.

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