Internals today were very bearish as you can see. Down volume dwarfed up volume, and decliners on the NYSE far exceeded advancers. The bears roared today, but they did so in small numbers with just above 1 billion NYSE shares traded, it wasn't a jaw dropping day. But it may just mean it wasn't a compitulation-type selloff that often is just a one day event and reversed immediately after. I think today was a sign of more selling pressure ahead. We need more market action to unfold for me to be more confident in stating that a top is in, but I know I'd try to start getting short with a tight stop ASAP. The risk/reward here in combination with the bearish evidence is too good to completely pass up in my opinion.
The above charts illustrate what I mentioned yesterday in that we may be seeing an exit from risky assets and an entrance into more conservative assets. This may be way the Nasdaq 100 has dipped out of the rally early and sharply while the Dow has held up quite well so far this week. The S&P also took a big hit today, probably because there are still a lot of fairly high risk and speculative stock in the index, unlike the Dow. So two days in a row we've had this behavior. Will it continue? The longer it does, the more likely a significant top is in place, and not just a minor two day lasting top. Also note the 5 wave decline I mentioned in the Nasdaq 100 this morning here.
The bottom line is the market's recent rally is overextended in price, sentiment and momentum, and the 5 wave rally on the daily charts and now the small 5 wave decline on the intraday charts suggest at least a fairly large pullback is in the cards now; if not a total market collapse for Primary wave ((3)). I would at least be nibbling on the bearish side right now. The risk/reward is too good to pass up in my view.
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The US dollar picture is mixed when looking at the euro and Australian dollars. The euro is not sporting a clear impulsive decline and I see a big 3 wave drop on the daily chart staring right at me. That suggests we need a new high at least above the 1.4200 level before thinking a major top is in place. The euro broke above my key level of 1.3465 but did not sustain it, and the price action and momentum look weak. In addition to that, the Australian dollar vs. the US dollar is sporting a textbook EWP structure with a 5 wave decline and a 3 wave rally stauling at the 61% fibonacci level.
My bias is to the short side here for the euro and Australian dollar, and therefore I'm bullish the US dollar. But I'd still be cautious and make sure risk is managed tight here.
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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.
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