On Wednesday morning a further Chinese yuan devaluation caused a mini panic as the S&P 500 dropped below the 200 day moving average and markets turned extremely bearish once the numbers starting to fall below that level. Stocks however managed to stage another miraculous reversal in the afternoon, which made the day over day move look like nothing ever happened.
On the back of Wednesday’s bullish reversal I now see a good chance of a rally into the end of the month due to seasonal patterns as well as investor sentiment that remains much too neutral if not outright bearish. Furthermore, next week’s monthly options expiration could act as a magnet for a rally.
Watch the short video: