Powerful rally overnight on the Dow, but the direction is not...

Powerful rally overnight on the Dow, but the direction is not resolved yet. Now comes the test.

My linked chart above shows the dilemma clearly.

I was expecting a three week rebound to the 50% level of the two recent down ranges. I.e. This week. We've hit it exactly.

A lot of traders would have been watching that 50% line in pink shown and started covering shorts.

But it stopped right at the 50% retrace level of the August falls at 16862 vs 16865 close.

Now we find out if it can close the week above and open next week higher.

I'm not convinced yet. Looks a volatile short cover rally to get up there. Gold powering up as well (got stopped out of a silly NCM gamble short after one day - still making rookie mistakes when I'm too cashed up). Rally could easily fail but a fascinating contest between bulls and bears right now.

The main bullish signal I see is the number of beaten up individual stocks coming off lows. Fantastic opportunities around.

I was 100% leveraged long last week. Closed those trades Monday and went to cash and opened shorts (ctx, rmd, qan). Started adding longs yesterday with Org as couldn't resist anymore. Will finish the week having rotated stocks to 55/45% long/short fully invested. Overall still a stock pickers market with just one eye on the index.