{"id":54314,"date":"2020-09-05T21:18:41","date_gmt":"2020-09-06T04:18:41","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=54314"},"modified":"2020-09-06T10:11:50","modified_gmt":"2020-09-06T17:11:50","slug":"buying-frenzy-pauses-ends-stock-market-bid-parabolic-run","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2020\/09\/05\/buying-frenzy-pauses-ends-stock-market-bid-parabolic-run\/","title":{"rendered":"A Pause in the Frenzy Ends Stock Market Bid for A Parabolic Run-Up – Above the 40 (September 4, 2020)"},"content":{"rendered":"\n

Stock Market Statistics<\/strong><\/h2>\n\n\n\n

AT40<\/strong> = 54.6% of stocks are trading above their respective 40-day moving averages (DMAs) (intraday low of 45.9% which was solid support in second half of July and early August)
AT200<\/strong> = 46.9% of stocks are trading above their respective 200DMAs
VIX<\/strong> = 30.8
Short-term Trading Call<\/strong>: cautiously bearish<\/p>\n\n\n\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

I thought I would be sitting on the sidelines watching the last 10% or so of a buying frenzy drive a parabolic run-up in the stock market. Instead, traders suddenly came to a screeching halt and cut off the case for a parabolic run-up<\/a>.<\/p>\n\n\n\n

The carnage in the stock market started on Thursday with the S&P 500 (SPY) tumbling 3.5%. Parabolic moves usually end badly, but this stock market correction was swifter and deeper than I could have expected. I did not see any specific news I want to credit with the selling. Profit-taking and buyer exhaustion are sufficient explanations. <\/p>\n\n\n\n

For the first 15 minutes or so of trading on Friday, traders seemed to take encouragement in the jobs report for August<\/a>. The subsequent selling in the stock market was swift but also brief. The next hour expanded the carnage to extreme levels. For example, big cap tech stocks shed 100s of billions in value in a flash. And then it stopped. For the rest of the day, “bargain hunters” fought their way back to a near flat close until 30 minutes of weakness to end the day.<\/p>\n\n\n\n

The stock market delivered three elements of trading I like to play but in rapid succession. Firstly, the follow-through selling confirmed the earlier bearish signals<\/a>. Secondly, the extremes at the intraday lows acted like oversold levels. Thirdly, the long road upward created a rally to fade. <\/p>\n\n\n\n

The Stock Market Indices<\/strong><\/h3>\n\n\n\n

The S&P 500 (SPY) closed with a 0.8% gain. The index dropped below the previous all-time high set last February before the bargain hunters showed up. The S&P 500 ended the week precariously perched atop its 20-day moving average (DMA). The one-day parabolic in the S&P 500 became a distant memory.<\/p>\n\n\n\n

\"The<\/a>
The S&P 500 (SPY) lost 0.8% after being down as much as 3.1% and trading below the former all-time high.<\/figcaption><\/figure><\/div>\n\n\n\n