Market Wrap

 This is the daily S&P 500 and all the talk in Technical circles are focussed on this triangle which is generally too large to be a consolidation/continuation triangle, yet not as big as some of the major triangle tops, it does appear however to be a triangle top from the October rally, it is proportionate in that sense. Top or not, the issue of "head fake" has become prevalent. Usually I would say that it is so obvious that it will be head faked, but the question of whether it will be head faked has become so obvious in technical circles, that I almost side with the idea of, "A head fake her is too obvious and too expected". The closing candle, which has no upper or lower wick is bearish and most commonly followed by a follow through selling day as you can see by the white arrows.

 The same pattern is visible on the SPY, the closing candle is also bearish, it is a rejection of higher prices and often a bearish candle as you can see by the examples. Volume was high today, this can be taken in 2 ways, 1) a serious break 2)short term oversold capitulation. The second is more common then the first, but considering where we are, it's a toss up.

 The SPY long term charts have been showing what every bit of information from hedge fund holdings to all kinds of redemptions have shown us, so the chart makes sense and is bearish, very much so.

Even on a short term basis today, the bearishness was very quick to materialize and confirm that apparently more should be on the way.

 The long term DIA chart shows the same extreme level of 3C bearishness.

 as did today's short term charts

 And the QQQ long term chart, very bearish., we have seen much worse falls on much less severe divergences.

 Financials, which are quickly becoming the epicenter of the crisis again have a much less ambiguous top, this is a descending triangle and is bearish, especially in a bearish environment (statistically). Today that top was broken on increasing volume, it is not unusual for price to linger in the area after such a break, but follow through selling would be a very bad sign for the market.

And XLF long term, a horrible negative leading divergence, the first of which created the top/reversal point.

Market breadth indictors are heading south in  hurry and credit is showing major dislocations from equities.

 This is a first crude attempt to show the difference between the S&P and credit, large peaks are where dislocations occur and the revert to the mean. On a long term basis, you can see the red peak that caused the S&P to fall or revert toward the mean, the two green arrows show the dislocation now and in 2008 at the same relative level after a larger dislocation formed tops in 2011 and 2007.

 Here's a 15 min hart showing the OCT rally in green when credit and equities were pretty much the same, it led to a decent rally, but at each red peak, there was a downside correction in the S&P and the dislocation between the two has only grown.

Here's a closer look.

The next 3 captures show today's dominant Price/Volume relationship, this is for the DOW with most stocks closing down on increased volume and with only 1 stock of 30 closing green

Here's the NASDAQ 100, again the dominant theme is close lower on heavier volume with 7 of 100 stocks closing green

And the S&P-500 with the same dominant P/V relationship and 38 of 500 stocks closing green.

After  prolonged decline, I would call this capitulation and look for a bounce, it still could be a 1 day oversold condition or the 3rd possibility is that it is the start of a much bigger fracture in the market.

These are the 239 Morningstar subindustry groups, only 8 closed green at very small gains, again this can be a sign of oversold, but that is more typical after a prolonged downtrend, the kind of break tht would be considered follow through selling after a day like this is rare and only happens a few times a year, so a bounce statistically is the most likely, but follow through selling would be a definitive sign of a major break in the market.

 Finally USO posted an evening star candle today, which is often a reversal candle and it did so on what appears to be a false breakout from a bearish wedge, the next few days should settle the USO question which has been very strange in all manners.

 The short term charts today didn't even try to confirm the gap up as you can see above and below.

ES is rather flat thus far with a slight 1 min positive divergence in AH.

The only currency pair we are concerned with right now largely mimics the ES market. Come 3 a.m. EDT, we'll get our first look at what the EU bond market is up to. Today was notable in that the sugar rush rumors that have been seen in the afternoon ONLY after Europe closes, did not hold today and there was no counter bad news to send the market lower, it broke of its own accord, so expect the rumors to start getting heavier and at a faster pace, the markets failure to respond to them will be a key development as the Forest is starting to take precedence over the trees.