The U.S. stock indexes finished the trading week higher. The DJIA gained 105.29 points for the week while the S&P 500 was higher by 25.10. The Nasdaq finished the week gaining 95.96 points and the Russell 2000 finished the week higher by 12.58 points.
The huge selloff in the markets that occurred over the past three weeks has put in a short term bottom in the markets.
One of the leading stock market indicators, the Monthly New High/New Low Index flashed exhaustion levels to the downside earlier this week. Coupled with the Weekly New High/New Low Index that had shown an extraordinarily number of New Lows versus New Highs, numbers that have not been seen since the 2011 market lows, the buy signal was given at the close of trading on Wednesday of this week.
There's a high probability of at least a 60 point S&P 500 move higher from that buy signal. So far, the S&P has gained 48 points. It would not be surprising to see another 12 points added early next week. It is not out of the question that the S&P target may be the 1950 area. That would be a total gain of nearly 100 S&P points.
However, make no mistake: This is a bear market and not the start of another bull market. This appears to be only a massive upside move within a bearish market and trend.
For those traders looking for long positions, we have started Endologix (ELGX), AMC Entertainment (AMC), and Inotek Pharma (ITEK). All three stocks are oversold on a daily basis and appear to be in a position to move higher for a short-term trade.
Attached is a chart of Inotek Pharma that shows a daily setup for a move higher.
This article is commentary by an independent contributor. At the time of publication, the author held ELGX, AMC, and ITEK.