" all in all we should have at least a "W" type base which is still fairly narrow, but these deep parabolic moves often have a more narrow reversal process. From the charts I see, I think a bounce is probably likely."
We had the start of a divergence, but too narrow of a base, a "V" reversal which is not common, this is why I was looking for a broader "W" shaped base that we could bounce off of. We ended up with something a bit wider by about 2-days, the wider the base, the more upside it can support.
We also have a lot of near term divergences that we use for timing suggesting the base is ready to go, the question is do we get some kind of pullback or head fake move first which is what I was looking at this afternoon in, Don't Chase- Market Idiocy , Market Update-Timing , and Going to Wait Until Monday to Add Longs .
At the close I'd truly say it's a toss up as there were some clear divergences , but still short enough timeframes they could be run over and not as numerous as they were a bit earlier. I still have the XLF calls which are at a gain, the IWM calls for this bounce (weekly) that expired today , I closed at just about break-even as that was a loss I didn't want to take, but after 4-day old news seemed to move the market, those calls ended the day at a 100% gain. We'll see about adding some early next week, otherwise the bigger picture trade is what we should really be looking to.
Index Futures did dump a bit after the close.
The Carry trades seemed to be in charge for most of the day...
High Yield Corp. Credit is supportive of a bounce as a short term market manipulation lever...
The Most Shorted Index is suggesting we see a move higher next week...
Shorter term , short term VIX futures look like a pullback Monday is probable...
As for internals, a BIG difference today. Of the 9 S&P sectors, all 9 closed green, however Utilities (Flight to Safety) lead . Of the 239 Morningstar groups I track, an amazing 227 closed green, a mirror reversal of several days this week including yesterday.
Breadth wasn't dramatically improved today, but much more than any time this week with the Percentage of NYSE stocks Above their 40-day moving average going from 20% on Tuesday to 28% today (23.1% yesterday), there's still plenty of room for the market to bounce based on oversold breadth alone.
As for the Dominant Price Volume Relationship today, we had a meaningful one, Pice Up / Volume Down, this is the most bearish of the 4 possibilities and heavily dominant with 25 of the Dow 30, 78 of the NASDAQ 100, 1051 of the R2K and 377 of the S&P 500. Typically this is a 1-day overbought event and the following day closes down which would fit nice with a pullback or head fake before a bounce higher, but as I said, at this point I feel it's pretty close to a toss up, either way we'll be able to get something good out of it.
That will do it for today, have a great weekend and I'm looking forward to next week already!
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