Friday, October 16, 2009

5 Down and a Nasdaq 100 Non-Confirmation in the Futures

The market battled back from its lows today but couldn't close the week above 10,000 in the Dow. If it did, it would probably be a bull trap and lead to sharp spike and reversal early next week. The S&P futures today make a nice 5 wave decline, then rallied in what looks like 5 waves up at the end of the day. However what should be the 5th wave that made a new high, was not confirmed by the Nasdaq 100 futures. You can see the comparison charts above. This divergence resulted in a sharp selloff into the close today, and also makes the Nasdaq 100 rally only in 3 waves, a correction. NYSE internals improved but were solidly negative. All in all, not quite the outstanding blowout week many bulls were hoping for in response to earnings.

So to end the week the Dow remains below 10,000 on a closing basis, internals and momentum waned significantly, we have 5 wave drops in the Nasdaq 100 and S&P futures, and a non-confirmed rally in the two indices followed by a sharp selloff.

Early next week should expose more what the market wants to do over the next few weeks. With all the evidence above in place, it sure opens the door for a market top. And if you look at my EUR/USD analysis showing the RSI topping levels and divergence, it only adds to the possible top being in place. This is just pure speculation at this point and we need further developments make a more solid assessment.

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