This morning was an absolute bloodbath. At one point TSLA was down over 10% on the day. PLTR was down more than 15% on the day. The Nasdaq dipped as low as 12397 before rallying over 500 points to finish 12920. From the lows to the close, it was a 4.3% rally, just ridiculous.
Does this mean the selloff is over? Who knows. I think the main reason the Nasdaq bounced so hard off the lows was because the 10 year yield fell today:
If the 10 year yield keeps falling, then tech stocks should keep rallying.
As for today’s candle on the Nasdaq, here’s what it looked like:
That’s a massive green hammer at the bottom of a fairly significant selloff. It’s a bullish sign that means markets might be changing direction soon. The green hammer shows that markets got slammed intraday, but then rallied hard off the lows to finish positive, which indicates that there was significant buying demand at the lows.
In other words, people bought the dip big time.
We saw a green hammer at the bottom of the January/February 2018 correction, too:
It wasn’t as clear a hammer, as it had a longer top wick. But you can see pretty clearly that the market got slammed and then traders bought the dip in mass quantities, bringing markets all the way out of the red and into the green by the close. That turned out to be the start of a decent rally to new highs.
Obviously this is just a candlestick pattern and is no surefire indicator that the selloff is finished, but that’s the type of candle you sometimes see at market bottoms–although by no means do they always mark the bottom of corrections.
What seems to be clear is that traders are still willing to buy the dip. Every leg down during this correction has been met with furious dip-buying:
I think there’s a good chance this selloff is over, to be quite honest. The reason is because the RSI on the 10 year yield is the most overbought it has been since the great bond massacre of 1994. This is the RSI only, just to provide a better look:
This has been an absolutely furious rally in bonds, and I think it’s pretty close to ending. This would in turn take the selling pressure off the Nasdaq.
But I really can’t say for sure.