Is this guy smart?
Stair-Step Downtrend Still Intact
By Mike Paulenoff, MPTrader.com
If ever there was a sluggish Monday, this would be it. The markets are pretty non-descript. Looking at the volume figures, with three hours to go, you have 600 million shares traded on the NYSE, on course for a billion shares or so, which is probably lower than average. The a/d line reads 1350 up and 1750 down, so a slight negative there. As we look at the chart action, it’s basically a tale of two different markets. You have the sluggish S&P and, on the other hand, you have the Nasdaq futures up 8-9 points off of Friday’s spike low in what I consider to be a recover rally off of the lows in the June Nasdaq E-mini from Friday’s low of 1442. Somewhere in the vicinity of 1466-72, I think that the June Nasdaq will peak and roll over and have another downleg. But for now that index is 1462 and up about 9 points on the day.
On the other hand, the E-mini June S&P is down 1.75 on the day at 1132 ¼. The interesting part about the E-mini June S&P is that it has a pattern that is less buoyant than the E-mini June Nasdaq and in fact could fail at just about any moment. That’s why we’re staying short that index and leaving the E-mini June Nasdaq alone.
Obviously the one index will not operate independently of the other for long, but for the time being the S&P is the weak sister for the week and from my technical perspective could roll over, like I said, at any moment. If that’s the case, a break below 1128 in the June S&P would trigger downside acceleration that will test last Thursday’s low at 1119. If that’s broken I think we’re going down to 1112-1110, which is the next significant downside objective for the E-mini June S&P.
If we go over to the QQQs, they’re trading with the buoyancy of the Nasdaq, as you might expect, but here too the pattern carved out from Friday’s low at 35.79 into today’s high at 36.39 seems to me to be countertrend and therefore a recovery bounce only. Yes, it does like it could move higher, perhaps up to the 36.40-.45 area. If it gets above 36.50 we will not want to be anywhere near the short side because that would argue that it’s not higher than we think as a recovery.
As long as it stays contained here in the 36.30-.40 area, I think it will fail later this afternoon and roll over. A break below 35.95-.93 in the Qs would be devastating. In fact, for starters, if the Qs break below 36.20 we’ll start to get preliminary signals that this move off of Friday’s low at 35.79 is complete.
So for now, all the indices are going sideways, and the lack of enthusiasm shouldn’t suggest that there are no buyers around; in fact, there are no sellers around either. The fact of the matter is though that when we look at what’s happened in the prior two weeks we see that there’s a stair-step downtrend that is pretty well formed. Until that pattern is broken we have to go with the dominant trend here, and that is that surprises right now will be on the downside, which will weaken the indices.
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