How the bears felt yesterday.
For the week - Qs down 1.52 (3%); DIA down 3%, IWM down 3 %, SPY down 3%.
As with the previous week, the major markets are moving in a volatile lockstep.
Weekly 3 linear regression study (30,11,3) of daily and weekly bars shown above.
The Qs are showing a rather ominous rollover pattern that may develop into a double top. At the same time, the daily Qs have broken through the LR30 lower support channel and the weekly Qs are clearly overbought on the LR30.
At this point the majority of the technical signals and the LR30s are negative.
The IWM has led the pack for the past few weeks, handily out performing the DIA and SPY. That may also be about to change.
For those who follow Telechart, Don Worden's Friday comments focused on the similarities between Friday's action and that of the Friday preceding Black Monday. Don noted 2 dominant price-volume relationships; price down with volume down (1349 stocks) and price down with volume up (1302 stocks). The first relationship is typical of bear markets and implies that more oversold conditions are yet to develop. The second relationship is more arbitrary. I'm sorry that I can't post the content of the post, but copyright laws prevent me from doing so. The salient points of his argument are similar to my short term view and I definitely wouldn't want to be trapped in any long term positions at this point.
I was surprised that volume was relatively muted in proportion to the downside move Friday. Looking back at those volume bars in March is more of what I expected and that may yet come to pass if things do get rolling to the downside next week. These downside slides tend to move in 3 day patterns; sometimes 2 down, 1 flat or slightly positive and then a whopper down.
Extreme caution is advised at these levels.
What has amazed me is the amount of positive economic spin coming out in the press recently announcing that the worst is over. I'm personally not buying it and think new lows are a real possibility by October and probably a lot sooner. The XLF (above) suggests what may be coming.
For now, I continue to daytrade only to manage risk, suck a few bucks out of the market and sleep at night.
My note on WM the other day suggested that you couldn't make much on a $9 stock. With WM touching $7.15 on Friday, that notion was shattered. Hope someone got a piece of that one.