Sunday, August 8, 2010
The Weak Ahead
No, I didn't mispell "Week" in the title of this post. But thanks for fact checking me. IIt's just a play on words since this upcoming "week" looks "weak" for the market. Get it? Okay it was dumb, I know, and I shouldn't have wasted people's time with it. But I'm just a few hours away from beer and baseball time and I'm on summer cruise control right now.
Friday's action looked promising at first, but again volumes didn't enter the market that would suggest a large wave 3, or sustained decline, was starting. The NYSE volume remained beneath the 1 billion shares level. But it was a Friday, and I still thought we could easily just have light volume for that reason, and then Monday we'd get continuation of the decline with higher volume. Wrong. The market again reversed into the close on an impulsive looking rally. So it seems the market might not be quite ready to roll over. But boy is it close.
The sharp selloff and reversal higher is still well in line with the weak diagonal looking pattern that the market has formed since the July 1st low. So the choppy, hard faught, up/down rallying continues. The reversal suggests the market might still grind out at least one more new high. It's not guaranteed by any means, but it looks likely at this point and I want to be mentally prepared for it.
What I'd really like to see to get aggressively short is a sharp rally that will act as a vacuum that sucks up all the remaining hesitant bulls into this rally from July 1st. A sharp move higher, preferably above the upper ascending trendline I have shown in the above chart, and then reversal the same day would be the perfect scenario to call a top and rush into the short side in my opinion. If that happens, it could easily happen very early this week. A rally to a new daily high, and then reversal and close to beneath the prior day's intraday low would be a picture perfect scenario to get short into that close. But regardless, the market's upside looks quite limited at this point, and the easy money to the upside has probably already been made, while the downside potential is quite large so that's where my focus is.
The divergences between other indices remains in place. (click here for the post on this topic).
Okay, I gotta get ready for Miller Time and the Red Sox vs Yankee game tonight. Hope you all are enjoying your summer!
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.