Breadth declined across the board with only 20% of NYSE stocks above their 40-day moving average which is as bad as it gets in a full-on bear market. In fact breadth deteriorated everywhere today, many indicators making new 2014 lows like the NASDAQ Composite's Advance/Decline line, however nowhere near as sharp as the decline from Thursday in which breadth fell by a huge margin after an already huge decline Wednesday, today was much more moderate and in line with normal expectations for a day like today closing solidly red with the Dow now negative on the year, that really only took about 6-days which is why I keep my core shorts in place.
Nine of nine S&P sectors closed red, of the 239 Morningstar groups I track, only 32 closed green.
All of this spells the same oversold breadth conditions that we saw on the first part of the "W" base, assuming it holds, that's what we saw again today making the market quite oversold and in a larger context, in a lot more trouble than most people probably realize, even the bears.
While the Dominant Price/Volume Relationship was Close Down/Volume Down which is really of no significance, many of the averages closed on heavy volume, especially the last 2.5 hours of the day which happens to be the same area we saw a lot of intraday positive divergences put in across a number of asset types. I suspect that our "W" bottom base is at the beginning of the end of its creation, again... assuming it can hold with the major macro wildcard being geo-political as Poland (who's desperate to get NATO action re: Russia) used the "Invasion" word today, that appears to be the area we saw the most 3C positive divergences/accumulation which is what we'd expect to see on a "W" bottom with a head fake.
Here's a quick chart tour of the afternoon divergences that look like we may have just finished up the "W" base...
Between the heavier volume on the day, the breadth of the market being very oversold, the "W" base forming as expected with a head fake move below Friday's lows (as expected) and these building divergences, I suspect we are finished with the base, however, I probably won't be entering any more long/bounce positions and I won't be closing any core shorts, this market is in too much trouble to miss that ride.
This is nowhere near the prettiest divergence I've seen and honestly even having a little long exposure here is a bit scary although my short exposure dwarfs it, but I think it's probably enough to get the job done.
Just remember what the highest probability resolution is if breadth hasn't al;ready given that away....
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