OCT 20 INDEX UPDATE
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Short-term technical readings:
DOW - lower midrange, paper umbrella
SPX - lower midrange, paper umbrella
OEX - lower midrange, paper umbrella
NAZ - lower midrange
NDX - lower midrange
VIX - midrange
NAZ NET NEW HIGHs-LOWs = NEGATIVE 25
If the overall market moves straight down, I would get CLASS 1 BUYs in 2-3 days(TUE/WED).
FRI's rally in the NAZ/NDX was on slightly lower volume as compared to THUR, which I feel is a hint that this short-term rally may not have legs. And we should forget that UGLY BIG BLACK CANDLE on WED. I will not make too much of FRI's afternoon rally, since my gut is saying that it may have been OPTION EXPIRATION related, which would also apply to the failure of the 3-DAY PATTERN. Also the NAZ NET HIs-LOs, was still negative and did not improve from the previous day, so that would add to the lack of strength of FRI's rally.
The period after the OPTION EXPIRATION and prior to the END-of-MONTH RALLY, is commonly a weaker period, which is next week. So, tying that with the lack of conviction in THU/FRI's slight rally and that BIG BLACK CANDLE, I am suspecting some more selling next week.
As for the PAPER UMBRELLA's which some may interpret as HAMMERs(bullish), I need to mention that I have noticed PAPER UMBRELLAs arriving in the middle of a short-term trend/pause before the trend resumes. Similar to a doji occuring mid-trend, as a pause, although it doesnt happen as often.
I have mentioned that BIG BLACK CANDLE often and the recent downside break in the RISING FLAGs/WEDGEs, but that doesn't mean that I am in convinced yet that the forth coming selloff will be very strong/huge, to the extent of a retest of SEPT's LOWs soon/immediately, at least not yet. Just based on the position of my short-term technical and lack of strong deterioration in the market internals, Im still leaning more towards a short-term HIGHER LOW, at least for now. Of course, if I start seeing extreme deterioration in the market internals, I will need to change my position.
Although Im not strongly bearish right now, just wanted to mention again that my analysis on BIG BLACK CANDLEs concluded that - if the BIG BLACK CANDLE arrived at/near a short-term top, the probability was very high of further downside. What the analysis did not show clearly was the size of the selling, since it varied from normal to huge. And yes, there were times when immediately after the BIG BLACK CANDLE there were small white candles, like THUR/FRI, before the selling resumed. However, I don't recall seeing 3 days of small candles(flatness) before the selling resumes. So if MON doesn't decline, then that would not fit any of the BIG BLACK CANDLE patterns I noticed.
Not that I rely alot on target projections, for now Im leaning towards the 1215-1250 region in the NDX. If that region doesn't hold, then we may see a retest of the SEPT LOWs, but for now Im not that negative; however I could change that position very quickly in light of that BIG BLACK CANDLE and the recent downside breaks of the RISING FLAGs/WEDGEs. |
