Wall Street Turns On Each Other

That's what appears to have happened today. PLEASE READ THE TRADE GUILD POST FIRST.

OK, now you understand what I mean...

Here's a few more charts for all of you.

First lets take a look at some more breadth charts. Some people don't feel breadth charts are all that useful anymore, I still appreciate their insight. When a market moves you see the headline price-"The Dow Was Up 2.3% Today!" and the media acts like it's a big deal and there's nothing more to the story except to give you every reason why, which are almost always wrong because the real reasons often appear days or weeks later.

So are two days when the market is up 2.3% on both, the same? Do they have the same meaning for the market? Of course not. It depends on where it happens, when it happens, to some extent why it happens and what really matters is how strong was the day. You can have a race car do 230 miles an hour and be ready to fall apart the next time you turn the engine on or you can have a race car do 200 miles an hour, but be reliable all season-there's a difference and that difference can be found in the breadth charts.

This shows us new highs made in the NASDAQ 100 vs. new lows. You can see, all day the new highs diminished and the new lows stayed at the same level-this is not a market with secret "extra underlying strength" it's a market falling apart.

This is the advancing issues in the NASDAQ 100 minus the declining issues, a steady trend up shows strength, a trend down shows weak breadth.

This indicator should follow price up or even lead it up in a strong market, you can see it's been very weak.

This is a crossover system I developed to help identify real signals vs the false signals that plague moving average crossover systems. For a buy 3 things need to happen, the price moving averages in the top window have to cross, yellow over blue. The custom indicator in yellow in the middle window must cross above it's blue moving average and finally Wilder's RSI must cross above the 50 level in the middle. For a short or a sell, reverse all of that. In the green boxes are the long signals in the red boxes are the sell signals-at the end of day we had a sell signal.

As you can see, between the Trade guild post and this one, there are many things to consider when judging the strength , meaning and outlook for a stock that moves in a particular direction. Not all race cars are built with the same quality.

Here's are outlook, with everything in 3C as bad as it is, I just can't see any meaningful change in character. As we saw today, the market can do what it wants for a little while, but eventually it'll catch up to all of those 3C signals. How many failed 3C signals have you seen? Probably very few.

If there are strong earnings and you know what I thin of MCD's earnings as they will be a biggie, then the market could try again to break $110 on the SPY. If it breaks out and sometime later in the day falls below $110 on heavy volume, you can short just about anything you want and you'll most likely make money. I would suggest the June 3rd ETFs until we are out of earnings season. If the market just continues the late day slide it began, then you can add to shorts (the June 3rd ETFs are the best candidates right now, but email me if you see something on the list that you'd like an opinion on). For new subscribers, don't go all in until we break the July lows, then it's fair game. I'm saving 25% cash no matter what.

So we'll see how our earnings positions do, today SBIB did fantastic for a 10.4% one day gain.

One issue I want to address and I'm going to do it in the next post, so read on.