Friday, April 11, 2008

Friday fade. . .big fade

OK, so I was right the first time. . .Monday was the pivot high. I knew if I waited around long enough I'd get it right. I was just one day ahead of myself. For those not using TradeStation, I'll review the embedded pivot high, pivot low signals in the weekly update tomorrow.
Well, that was ugly today and the lack of volume was puzzling. Maybe everyone who normally trades the Qs and other minor stuff like the DIA, IWM and SPY went over and traded GE today. . .that would account for the 366M shares traded, which is about 10 times normal. If GE's poor showing and subsequent negative forecast are any indication of things to come, we had better batten the hatches and gird our loins, cause it could get really nasty.
Right off the bat you had to know it was going to be a bad day. When the NYAD opens at .11, that's not a signal to buy. . .that's a signal to stand back so you don't get clobbered. The obvious concern is that the dramatic fall of GE at the open (a stock coveted by widows, orphans and retirees for its resilience and reliability) could be the catalyst for considerable collateral damage throughout the markets. Forget for a moment that the Qs components have little relation to a behemoth like GE (which should result in a showing of relative strength for the Qs), when a whale gets wounded all the local smaller fish go into a fright frenzy and there are few safe havens.
From a technical perspective, the NYADs dismal weakness all day clinging to S1 and the TICK finding S1 as a baseline after 12:00 suggested no afternoon rally would materialize. Plus, it was Friday, and with GE's bungle, risk managers REALLY wanted to be gone for the weekend in case the other shoe fell. The 10/20 5 minute gave a clear sell signal all day long right into the close. Once again I neglected to note yesterday's 10/20 sell cross 20 minutes prior to the close. . .it's proven to be a good next day open forecaster that merits a look.

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