EOD COMMENT: 10:30 PM PDT
Nothing much to add at this point. Many of the 60 minute charts look like they’re about to roll over to the bearish side — VIX, SPX, RUT, etc. Most of the 60-minute charts also feature 10, 20 and 50 SMA’s in a bearish configuration, while the daily charts are getting there, with a 10 day still above the 20, but the 20 below the 50. The 3 EMA crossed the 10 SMA today, and that’s an excellent bearish signal (once confirmed.)
Still looking for a bounce, possibly at the 50 SMA at 1315, but more likely the -1 std deb regression channel line, which coincides with the .382 Fib at about 1301. We should continue to see /DX gains, as the situation in Greece, Ireland and Italy continue to concern investors. Will this be 2011’s Lehman Bros?
UPDATE: 11:20 AM PDT
Just hit 1327, which is the channel midline AND the .618 fib level — a logical top for the day. The /DX did a swan dive following release of the Fed minutes, but seems to have caught itself at the bottom of the falling wedge — which I’m now broadening. Doesn’t change the bigger picture, but it buys dollar bears (and stock bulls) a little more time.
UPDATE: 7:55 AM PDT
Confusing situation. The move I was expecting down to the -1 std dev line on the regression channel happened perfectly — but in the futures overnight (1296 on /ES). The bounce back was supposed to be to the midline (1325 on /ES, 1326 on SPX). But, we’re just shy of that now. I think the algo’s are wondering if a dip in the futures “counted” or not.
If we get back above 1325, I’ll be looking for additional short entry positions. But, I think there is likely to be another, larger bounce on the way down — maybe at 1300 still — to take the place of the one that didn’t happen in the cash markets. Just be aware that a bigger bounce doesn’t mean the bull market is back.
In terms of 2007 comparisons, yesterday was likely our December 11th — pretty clear cut. But, on the 12th, SPX put in a rickshaw man, basically a doji with very long tails and a tiny body in the middle — indicating indecision. http://thepatternsite.com/RickshawMan.html The market opened up 10 over the 11th’s 40 pt plunge, soared 25 points in 5 minutes to recover almost all the previous day’s losses. But, it gave them up to close down 1 point. Talk about driving investors crazy…
The next 4 sessions it dropped 42 points, to complete a 6-day 90 pt drop from the top. It was followed by a 5-day, 64 pt retracement that took prices to their final pattern high of 1499. This move was incorrectly assumed by some to be the start of [iii] of 5 up. Nine days later, the market was down to 1376, testing the previous lows. It bounced a bit there, but hit 1270 9 days later.
ORIGINAL POST: 6:27 AM PDT
In overnight action, the futures declined to touch the -1 std dev line in our regression channel. This was exactly what I expected from the cash market when I wrote last night’s update — just didn’t think it would happen that fast.
|REGRESSION CHANNEL ON /ES|
We’ll keep an eye on the cash market opening to see if there’s a follow-through, or if all the fun happened overnight. If we do get a bump up, I expect it to be the last best opportunity to add more short positions.