Friday, October 22, 2010

It sure looks like it.

Today was an extremely important day.  SPX made a HH and HL today which by itself is a positive for the mkts for tomorrow.  The range from hi to low was 18 points and spx closed 9 points from the low of the day.  It closed in the positive.  RUT made a HH and LL and closed in the negative. It had a 19 point range and closed a little less than  8 points from the bottom. It had an intraday reversal.  That was to be expected being yesterday was an inside day. For RUT the top was made last Friday and these 4 days it has just been hovering around which is a common occurrence during the formation of a top.  
The chart on the left is SPX Hourly.   Lines 1 and 5 form the primary channel.  Line 3 is the median and 2 and 4 further half sub divisions.  These lines are drawn where I can find maximum order of parallel channels.  For spx to turn negative it has trade below the line 5 and may be come back to it for a back test and fail and have a substantial decline say about 30 points. That is what happens generally to trigger the decline.  We have had some nice disappointments from stocks that street adores.  There is bad news on the mortgage and some banks and lenders are being tossed around in the news as being in trouble.  There is some confusion on the future direction of the dollar.  The treasury hinted that dollar is at par.  SPX reacted today from being very positive to negative and 50% rally for the 18 point decline.  These are signs of trouble.  Contrasting that to SPX action around 8/25 when the bottom was made  I find it to be exactly opposite.  1191.8 if the magic number for this month.  Anything of significance over that like 1201 and the decline theory if out the window. .  
The chart on the right is TNA. It clearly broke down and is back testing the last trend line.  For the decline to continue this should fail Back above the trend line and a new high and the decline theory here is also out.
I am wanting to go bearish but not all the pegs are in place YET. I will trade the points using my signals.  Join me and my buddies at the CIL for a lively discussion and market insights.

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