INDEX UPDATE
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In the past when the market was hot and heading my technicals were consistently in the overbought region for months and when I did get a CLASS SELL signal the market would dip a big 50 points and on a intraday basis. In most cases it was also a technical breakout meaning that my TA was of little use.
The reason I am mentioning that is that I am getting hints of a technical breakdown which is very hard to predict and is subjective not analytical.
Here are the hints that we may be seeing a technical breakdown. Firstly please understand such hints are in relation to where the technicals are which is in the oversold range for the overall market, except for certain HiTECH sectors such as the computors, internet, software, MSH.
1) DOW, SPX, NAZ and many other indexes dropped below and fully covered the gap or the early morning strong gains in the same day. I have not seen this happen before when in the overbought or oversold range but only when it was in the mid-range.
2) Increasing volitility to the downside
3) increasingly wild swings, indicating possible change in direction
Another observation of the swings is the speed. We dropped 220 points in less than a day and regain 160 of the 220 points lost in about 4 hours starting yesterday and overlapping into this morning. If you also include the retracement today of about 100 points the DOW moved almost 500 points in only 2 days (both directions)
4) increasingly unpredictability, but now to the downside. Predicability was low during the strong runup, now are we moving to the opposite direction and the predicability is getting worse again.
5) lack of duration of my CLASS BUY signals. My CLASS BUY signals did work well, but what normally happens is that it will continue up more, and have a complete reversal and more in the same day.
The above are mainly subjective observations, now tie them into increasingly negative technicals sigals (below) - is this the recipe for a technical breakdown.
1) NEW LOWS increasing rapidly, NEW HIGHS decreasing rapidly
2) higher interest rates
3) negative news about interest rates
4) liqudity dropping, money still on the sidelines but reducing
5) earnings coming to an end, so that will reduce positive news to hold up the market.
6) negative news from analysts calling for a correction
7) sentiment changing.
8) etc.
After today's performance in the market, it is starting to appear that the market is technically damaged.
I guess the best way to explain it is the increasing abnormalities in the market which are becoming apparent as it was when the market was running up, but to the negative side.
Hope I made sense again.
Seeya |
