Yesterday's bite was a lot worse than its bark in the market, however, sticking with the dog theme, even the sun shines on a dog's.... once in a while.The entire Augusut cycle from the deeply oversol July 31st with the SPX down 2% that day, which was not the oversold condition, not even the Russell 2000 being down -8% on that leg was responsible for the oversold condition.
It wasn't indicators like Stochastics pegging 10 or RSI under 20 (those things can go on for a long time), it was market breadth collapsing. I've shown a lot of breadth charts and they are important because they are the support, the actual stocks, the internals and if they are going down with a market that is going up, sideways or not down as badly as the internals are, it eventually leads to what you might think of as a sink hole. I had just seen on TV a few nights ago a small neighborhood pond that saw a huge vortex or whirlpool sucking huge barges on the pond of 100 meters in to it, greatly expanding the pond to a near lake after it had sucked just about everything on the water and nearby in to it.
There had been a mining company mining salt beneath the pond for some years and an oil drilling platform made a small hole that accidentally punched through the roof of the mining shaft which wouldn't explain a whilrpool the size that could such down a 100 meter barge. Remember, this was a salt mine, so the erosion of the salt caused by a small hole from the oil drilling platform created what in essence was a large sinkhole which many of us in central and northern Florida are familiar with.
This is a lot like market breadth. Some of you may recall the comparisons I made in early August after putting out a near emergency Daily Update on July 31st, Daily Wrap (these are always interesting to look back on, roll the chart back to that day, see the bearishness in the market and then the update as we were on the right side of the chart at that point not knowing what comes next, but with a pretty good forecast based on concepts we use every day), in any case it was market breadth had been so exhausted, it's pretty hard for Wall St. to move anything in that type of environment. This led to our base call and bounce call, although it was hard to say how far we'd go at the time, but our targets were pretty darn close from August 11th, the first day of the rally.
Back to the whirlpool... The market is a lot like a sink hole or whirlpool as market breadth has collapsed below it, the only buyers left in the market have been corporate buybacks, but Q2 data shows that party is over and Corp. Buybacks are now back at levels seen at Q1 2013, in other words one of the last bastions of buying has essentially stalled and breadth is proving it.
Nearby breadth readings of late have seen intraday TICK sell offs in the -1500 to -2000 range which is extreme, it's no wonder these are manifesting on daily data seen after the market closes in the daily wrap when I can compile all of the data.
In any case, other than the August cycle which has run pretty much as predicted to the areas predicted and for the reasons predicted, we find ourselves at a nasty inflection point where the market's bite is a lot worse than its bark at present, but not for long.
However, as far as today goes, as shown last night, on a short term basis from the Dominant Price/Volume Relationship to the 9 of 9 S&P sectors red to the 17 of 239 Morningstar Industry and Sub-Industry groups green yesterday to the SPX down 5 of the last 6 days and the SPX and Dow with the worst daily performance in 5 weeks, WE ARE SHORT TERM OVERSOLD.
Check volume on days like yesterday, MCP which I will update later today put in the kind of volume I was hoping to see by the close, although not the candlestick, so far it has recovered 4.67% this morning.
There are no divergences other than what I'd call accidental divergences supporting the market averages, for example...
Lastly, the USD./JPY v ES correlation is dead...
The only one seeming to work is the wounded AUD/JPY
I'll have some updates for you, but most importantly I'm spending a lot of time looking for the right positions while we have the brief reprieve.
On a side note, the new website is truly, almost finished. There are tons of new resources for you including risk management calculators we have programmed for several different risk management theories, but what I need most of all is content types.
You'll be able to choose whether you want ALL content delivered to you by email updates just like now or if you only want certain types like Trade Ideas, Market Updates, Daily Wrap, etc.
What I'd like from you is a list , as specific as you need to be about the specific content types you'd like me to include, the content types that would make things easier for you.
Follow ups? Trade Ideas, short term trade ideas? Option trade ideas? Etc.
The sooner I get these pinned down, the sooner the site will be up and running and you'll receive your emails with temporary passwords allowing you to login, change your user settings and enjoy a lot of new features I think will enhance your experience. Again, these are all simple content types essentially tagged for email delivery, you'll still see all articles on the members' site.
Thanks for the input.
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