Today the market finally ran out of gas. After showing extremes in various indicators, the market sold off hard today. Although it closed off its lows, the bulls were unable to regain control and push the market significantly higher into the close. The late day rally also fits well into the S&P's wave count as a 4th wave, so we should see some continuation to the downside on Monday. The S&P is sporting the best short term wave structure from what I can see at this point, so I'm charting my count there for now. If we can break today's lows real early on Monday, it will give us a real nice 5 wave drop from the highs, and allow me to get aggressively short on the ensuing corrective rally since the larger trend would clearly be down. So I'm looking for a quick continuation downward on Monday, followed by a corrective rally that will top and reverse before exceeding yesterday's highs.
Dow and S&P Divergences
So yesterday I pointed out that the Dow made a new high while the S&P did not. You can see what I was talking about in the above charts with the first set of blue lines. You can see that it led to a big selloff today. Although divergences between these two indices doesn't always result in reversals, it's good to pay attention to them as they often offer good early warning signs. Also notice that at the end of the day today we had another divergence with the Dow making a new high and the S&P not doing so. Will this lead to the same result as it did before? a selloff? I think so. The wave count is incomplete as shown earlier, and with the divergence shown in these two indices late in the day, the evidence points toward lower levels early Monday.
NYSE Internals
Today's selloff was done with conviction as you can see from the above NYSE internal data. 92% of its volume today was to the downside, and decliners outpaced advancers 4.32 to 1. So the bears had the upper hand today as the bulls stayed on the sidelines. I'm not going to get into total volume today because it was options expiration and that will skew the numbers a bit.
Goldman Sachs - OUCH!
The big news story today was about cream of the crop firm, Goldman Sachs, being charged with fraud by the SEC. I'm sure lots of politics are behind this, but whatever the motivation is, it was a surprise to the market. Just look at Goldman's daily chart above. It's ugly.
SUMMARY
So it appears the long long awaited short term top and reversal has registered. With one more shot down on Monday to break today's lows, we'll have a nice 5 wave decline from the highs this week. Because of that, we will know that the larger trend is down, and that any large rally is a correction and should be sold. Only a break above yesterday's highs would negate the short term bearish view. My initial target for the decline is still the 1171 area in the S&P, but judging by the structure and behavior of the decline, my targets may become much much lower.
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.
No comments:
Post a Comment