I said if breadth doesn't get a break here soon, like early this week, it can go from a deeply oversold status to straight out bear market decline, you simply can't have more stocks trading down by 20% than those making new highs and expect the market to hold. This is where you have to step back and not look at the stock market, but the market of stocks, they are telling the story of the stock market long before it is written.
Small and mid-caps have taken the brunt of the punishment which is why the Russell 2000 looks so bad vs the other averages, but that's creeping in to the NASDAQ 100 and has thoroughly infiltrated the NASDAQ Composite. Also as I have been making rounds the last few hours, I've noticed quite a fe large caps breaking trendlines.
The Russell put in a major 1-day Key Reversal Friday or a bearish engulfing pattern and while I know this is not how we draw downtrend lines, I think it makes its point...
You already know what I think of the Dow Transports as we have a phased in position in IYT short...
I thought it would be interesting to look at transports from 2007's top...
Even the safe-haven Utilities sector where a lot of long only funds will seek refuge is forming a H&S top of major proportions...
In some more of my perusing this morning, as I knew I'd have some time, it looks to me the SPX 500-day is son going to be in play which will be a major sentiment shift, I think the market will try to catch as many bulls on the good foot while they can rather than everyone on the same side of the boat which is exactly why I don't like it when there's a lot of people calling for tops, although I profoundly respect what Prechter does and believe he's right as you know, I just don't like it all hitting at the same time.
y, rose to levels vs. price I have NEVER seen before and in a single day.
The 3C NASDAQ Composite looks worse now than anytime in the last 15 years, actually more...
I believe as the F_E_D's QE ends, volatility which has been super low the last several years is set to expand rapidly as a major source of liquidity evaporates from the market and even "IF" the ECB engaged in follow on private QE, their program would be no where near the size of the F_E_D's, the PBoC thinks in completely different terms, rather than month by month or even year by year, they plan their economy a decade in advance so their moves tend to be slower, less aggressive. Expect volatility to increase rapidly as we move forward which some of you traders will appreciate.
Now to more recent information. The $USD made a swing high overnight, this seems to have coordinated with gold making a swing low as we have recently seen information that gold may be getting ready for a pullback buy for a longer term trend play, actually GDX which is tightly correlated, but has been stronger in moves is what I'm most interested in. Gold's gap up on the $USD swing high and back down is interesting, but I don't think it's the complete evidence we are looking for as confirmation which I think we will get, we just want it at the right time with high confidence so we have some time there in my view, but you can probably see why I closed the DUSt (3x short gold miners) and took gains as I suspected we would head more sideways rather than down in gold and GDX in coming days.
Also overnight, Futures were hit again, this time on Euro-area PMI's...
The Chinese PMI data was better than consensus, but as copper has recently swung lower, Iron ore making recent all time new lows and now rubber joining iron ore in all time new lows, you have to doubt the validity of manufacturing strength in China. While the PMI print beat, the sub-indicies are always where the devil is found, in the details. Input and output prices looked bad as did employment and the beat was only 50.5 vs consensus of 50, borderline contraction. The $AUD rallied on the China data as it's the most sensitive local currency, but has given back a lot of the gains since this morning.
The big news overnight obviously was the bombing of ISIS/Syria, which is interesting as Syria has long been on the radar for a campaign to remove Assad, one has to wonder how many Syrian targets are being hit. As far as I know, Assad did not consent to "Coalition" (whatever that coalition may be as many have backed out), forces conducting a bombing campaign in what is otherwise a sovereign nation. Israel got in to the fray as well as they downed a Syrian jet fighter in their air space. I'm sure the House of Saud is very happy as is Qatar which would love to run an oil pipeline through Syria, but Assad needs to be removed to that end.
Some say the bid in gold was a safe haven bid on the bombing campaign, although it matches well with the $USD pivot high and the market typically responds favorably to action, "When the missiles fly, it's time to buy", as uncertainty in the run-up is removed, the thing the market hates the most, "uncertainty". In any case we've been tracking divergences there long before the bombing started, whether they are related to inside information, who knows, but they are also along the lines of our longer term expectations from July.
Oil is obviously up, we'll have to take a closer look at USO and will.
As far as overnight markets, Shanghai was up +.87%, Hang Seng -.49, Nikkei down -.71% with Europe currently (at last look), seeing the FTSE 100 down -1.29, the DAX -1.,31% and the CAC-40 -1.44%.
I suspect we do get the divegrence to try to work off some of the deeply oversold conditions everywhere last night, but I don't think repair is remotely possible at this point and it's just a short matter of time before these deeply oversold conditions will no longer mark a short term correction, but instead will just see the entire facade crumble as there's simply less and less support for the averages.
Now, on with out day.
Thus far we seem to have plenty of time for entries as we want to move on price strength and our divegrence , at least in the IWM this morning, which is why I knew I had time to do the research and write this morning, looks like this...
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