Thanks for the update. Interesting news site too. I am sooo far behind tonight I am too tired to type anymore. Here is what I just posted at our home site which pretty much explains what I see and how I think it can be played.
...As many people already know, I rarely trade Fridays and as such, I really am not contemplating on doing a whole lot tomorrow.
I have read all kinds of things tonight ranging from the extremely bullish to the extreme bearish views. I chose to post what I did earlier only as an attempt to show some lurking dangers that lie ahead and to show the early clue that was dismissed at first by many.
Today, I saw danger almost right off the bat. The strong close yesterday was on good volume and broadening out across the market after starting in only narrow sectors. This morning's lack of follow through was the first strike against the market. I therefore felt confident in Don's call for a retest but thought we could still get at least another 100 or so on the NDX. When we bounced up, I set my stop losses and went back to my regular work.
a Few hours into the market, I saw the TRIN had been creeping up all morning and was now solidly in the distribution range showing the dumping going on with each rally attempt. The positive TICKs were being met with large blocks going off to lighten up. Strike two.
Once the leading stocks started to fade and it became apparent they couldn't hold their morning's gains, it was strike three and it was over. I can not emphasise enough how useful watching TICK and TRIN is for showing underlying distribution/ accumulation in the market.
Now, what will the short term bring? I am actually fairly neutral with a bearish tone in that I see today as a MAJOR blow to the bulls. We rallied to the fib retrace level and some MILD resistance and couldn't punch through. This is going to weigh on the dip buyers that were praying for a quick end to this downtrend.
However, I also still see us above most supports although sitting precariously close to them if not right on them. The Bulls HAVE to rally this tomorrow or we are in deep doo doo IMO. I show us nearing extreme over sold levels and am very close to a mid term buy signal here. Note I said Mid term as in my multi week bounce area but I am NOT there yet. I will not rule out an extreme move here but I still am looking for a buy point. I just am not so sure where that point will be. Tomorrow or Monday would be much much too early to have a successful retest of a meaningful low so if we do dip and rally, I would not believe it unless it put up some extremely pretty candles that could support more of a V bottom call which is rare in a correction this strong.
On the other hand, I am not mid term bullish either. I see the need for a further down the road retest of the lows, a double bottom in my indicators and I would like to see a few class buy signals instead of the short term signals I am getting now. I have received signals on all the previous major bottoms ( 97, 98, both 99s etc.)
Also at the height of of the manic bull, Rallies were relentless, running farther than I thought possible and when I got my signals to short, the drops were often intra day only before the rallies resumed off into the stratosphere. The last few rally attempts have been just the opposite. The drops come and grind down, piercing supports, they trend outside of formations, make clear cut lower highs and lows and when the buy signals ring, the rallies are only a few hours to a day long and then the bottom falls out and down we go again. Not good.
Don and I were unable to talk long tonight due to some technical difficulties but we were discussing the dangers of the cycles and the large Diamond on the weekly DOW and the daily SPX. He made some very good points about cycles and extreme moves at ends of those cycles but that is his fire so I will let him explain.
Basically I agree with him that the threat here is now higher than previously thought. The burst to psychology was big today. Our downside originally was targeting the 2900 area on the NASDAQ with a bearish target of 2500 if things really got ugly. The diamond formations and the rapid failures of rallies now shows the downside risk could be far greater due to the continuiing complacency across this market. All across SI tonight there is still talk of buying dips, waiting out the short term correction because it will bounce back, holding on just until it gets back to where I bought it etc. NO FEAR!!!
I too have no fear. My stance as it stands right now is that we are almost too over sold to have the BK and we are very close to a buy signal for a summer blow off of a week or two to lull back in the money on the sidelines. This has been my view for a while and I am backing off slightly but am still watching for it. I want to see a TRIN that is below 55 sustained for a while and probably a low TRIN in the middle of a drop showing quiet accumulation while the retail investors are selling in fear. I want to see some fear and changing of shares to smarter hands, not necessarily stronger hands.
On the other hand, I am more concious now of the severe danger at hand and will be using even tighter stops if and when I get in than I normally do and I will stay away from the higher risk trades I have been scoping out thus far.
I saw a good post by someone who religiously tracks and plots Fund flows. Apparently he is making a case that Fund flows are reversing out of the market at a clear clip and that money is leaving the market at an accelerating pace. If true, this could be serious as all that money that is rumored to be sloshing around may in fact not be there at all. There were rumors of a Hedge fund going under again today and the newest Sector SPiders were opened for trading today which means all the accumulation for those is also over. Basically it means that there isn't much to move this market up for any sustained length of time. We need the pros to come back from vacation and to start moving things again. We need J6P to start getting second and third Mortgages on thier homes to play the market and we need some good news. Otherwise this big diamond and the 3 peaks and a dome on my 3 line chart from months ago of the NASDAQ may end up in a history book.
I may buy if we rally early tomorrow on good news but I will be flat by the close and will be on guard until we get some meaningful good conditions as I wrote. If we flush on bad news out of the gate, I would be comfortable staying short over the weekend for a likely really ugly next week.
Hey Don, take it easy, sometimes gut feels are the best ones. There is something to be said for experience in these markets.
Hope some of this makes sense. I am really tired and I have a complicated view of the market and how to trade it either way. Basically I think the trading range thing is over and we are with in 2 weeks of a Major Major move. We are either going to tank hard or we will get a bounce, rally for a while then fail and drop really hard in about 6-8 weeks. The apex on the SPX diamond is about 6 days out so I have multiple things pointing to a resolution in the next couple weeks max with the odds being sooner than later.
Good Luck,
Lee |
