Capitulation? Or a Bounce to Sell Into Now?
The iShares Nasdaq Biotechnology Index (IBB) is emblematic of a risk-on environment, and closed below the 200-day moving average for the first time since 2012. The next level of support is around the 200 level.
A further breakout in the iShares Barclays 20+ Yr Treasury Bond ETF (TLT) would signal a continuation of a risk-off environment, as investors flock to safer instruments, pushing yields lower.
What to Look For When Determining Whether You Should BTD or STR We will very likely get a bounce at some point in the next week. The question is, how do you know if it is just a bounce or if we have instead hit a short-term bottom and a new upend will emerge with staying power? Here are some signs to look for when searching for a bottom:
- A distributive day based on breadth indicators as well as extreme volume would give credence to potential capitulation.
- An up day that shows follow through and can sustain itself for more than two days.
- Money coming back into biotechs as well as the Nasdaq and small-cap stocks.
- 20-year Treasury bonds fading.
- CBOE Market Volatility Index sliding back below 14.
- A spike in the put/call ratio.
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