What more can be said for a market that makes its fourth try at critical resistance with a positive divergence in place and spits the bit. Hard to believe how bad the market was today considering what was set in motion. If this was a head fake lower, what a fake it was. Bearish action for sure. We started out with a gap up that took us to that magic number once again at 1105 S&P 500. The market looked poised to take it out but we were very overbought on the short-term 60-minute charts where we saw 70 + RSI’s and 90 + stochastic’s. MACD’s top side as well.
Some selling was due for sure, thus as we started to pull back off 1105 it made sense to me. However, to see the markets finish basically red blows ones mind. The Nasdaq finishing forty points off the highs is sad action for the bulls to say the least. The market closed on the lows, which is also terrible action. The 60-minute charts have unwound, but falling this far off the top is not great news for anyone who is bullish. Makes you wonder just where we truly are in this market. Doesn’t look good but you never know for sure.
The reason you never know is we are still trading in that range from 1040 at the bottom to 1105 at the top. Never has a range been so easy to understand from a point perspective. Triple bottom at 1040 (1040/1044/1042 in order) and 1105 at the top, reached now four times. It’s normal to put in a right shoulder off the head-and-shoulders pattern, but that would require a break above 1105 and we just can’t get it done. If we got through we’d have to deal with resistance at the 50-day exponential moving average at 1120, but at least that gives the pattern some symmetry. Not perfect but some. 1140 would be about right, but it doesn’t look like the market wants anything to do with 1140. If the right shoulder is this weak or really non existent, just how weak are things one has to ask!!
So the fight is on at 1105 down to 1040. The bears had no trouble putting the bulls in their place yet again and now the bears need to follow through on their easy save today and take this market back down in a big way. You’d think they’ll make at least some attempt after today’s action. The bulls were pushed around so easily you have to think the bears are ready to try yet again. Each side has the onus of getting the job done. The bulls failed badly. Let’s see what the bears can do now. If they gain no traction, we’re likely stuck for a longer time still in this horrible trading range that’s really no fun whatsoever. On everyone’s nerves, bulls and bears alike.
The internals today were interesting. Although the market stunk up the joint as they say, the advance/decline line was positive. 24/14 positive on the NYSE and 14/11 on the Nasdaq. Not great but positive, meaning more stocks participated on the long side than the action would make one think after looking at how the market deteriorated as the day went along. This too gives the market some hope. It’s far from being wonderful news for the bulls but at least they can say that more stocks performed positively than not on a day where we saw terrible overall action.
Folks, today was bearish, but it’s also too early to be a bear. Only when we lose 1040 with force can we know we’re in a bear market. The problem is, on any move down below 1040 S&P 500, it appears almost certain that the daily charts will print yet another positive divergence. This complicates things because you have to wonder how hard the bears will step on it knowing they’ll be running in to positive divergences. Time will tell, however, for now we remain in this awful trading range with no one in total control but with the bears still having the overall advantage below 1105.
Peace,
Jack
Two charts to keep and eye on . Standard & Poor’s Depositary Receipts (SPY) and VXX. You may want to follow the IPath S&P 500 VIX Short-Term Futures ETN (VXX) and watch the 50 EMA to see if it catches or breaks through.
