By far one of the most orderly sessions we've traded in a long time. Markets opened relatively flat, sold off at the open and never looked up from there. What a picture perfect day to be a put trader for sure! No wild gap opens or irrational spikes to deal with in the least.
Speaking of which, we saw absolutely zero buyers materialize in the waning hours today as the bottom did not find support until the closing bell rang. Even that didn't offer bulls any solace if my Qcharts data is accurate because SP01Z futures are trading -10 points below cash. Unless we see a huge bullish pop in the pre- market tomorrow the selloff did not end at Monday's bell.
Speaking of Qcharts, mine are not painting in half the data they should be. On the est of days they seem to be seriously bandwidth challenged and tonight I'm working off dial-up so that ain't gonna help. What little we require of charts can be aptly handled by BigCharts service instead.
First let me state the obvious: all 60/30 minute chart stochastic values are buried in oversold extreme while still pointing straight south in bearish fashion. Let's expand our vision just a tad and see what the bigger picture looks like:
(Daily Chart: Dow)
After banging its head near formidable resistance once more, the Dow shed -275 points to close on its session low. We see what could be a bearish reversal "Evening Star" three-session pattern where last Thursday was wildly bullish, Friday was mixed and Monday almost negated Thursday & Friday's combined gains. Stochastic values have once again turned bearish for now as well.
Another interesting study is the DMI(ADX) logged below. Without taking time to explain this one in detail, suffice it to say that we often see a rally when the measures contract (pinch) and selloff once the pinch expands (paunch). Those of you who've been to Larry Williams seminars no details to the pinch/paunch theory while those who haven't been are out of luck for now... it is his proprietary info. Nonetheless, expect a sharp selloff to begin when these three value lines expand and flare out.
(Daily Chart: NDX)
Same for the NDX, which held up longer than the Dow before rolling over in moderate fashion itself. Looks pretty weak and bearish to me.
(Daily Chart: SPX)
Ditto both major S&P indexes with the SPX depicted here. The only thing I can see of bullish fashion in any of these charts is the fact that uptrend lines remain intact since 9/21 lows but further weakness would break below them tomorrow.
So I get my fingers singed by readers who disagree, which is perfectly fine. Then John Bollinger reportedly appears on CNBC, says he sees a big sideways trading range for the next ten years as quite possible and I get buried in email again by many of the same readers imploring me to say it can't be true! Isn't that what I wrote 2,000 words saying essentially the same thing? No pats on the back for me: I heard John B, Dick Arms, Larry Williams, Warren Buffett and a host of others state this opinion before I ever did.
Which tells me that a bunch of nice folks still believe in their heart of hearts that this little 20-month bear market is almost over as Uncle "Easy Al" Greenspan saves the day (and bull). Folks, we cannot create our own market reality and that includes Greenspan & Co who are powerless, absolutely powerless over guiding long-term economic direction. They most certainly can thwart direction in the near term but remember our elementary science universal laws: every action has an equal reaction. The efforts our blessed Fed have made to prop up an ailing market will not cure the disease, just slow its manifestation. This means we suffer a lesser effect over much longer time than what would have naturally occurred.
Is that better for us or worse? Beats me, but I agree with John. These markets will roll in a large trading range pinned between recent highs and lows for a long time, probably longer than most care to think about. But then again we all know JDSU will never see $125 per share again in its life, now don't we? Don't we?
Don't fall in love with either direction, but it might pay real well to favor the downside for now!
Best Trading Wishes,