I follow about a dozen breadth and other indicators and the vast majority are flashing extreme oversold readings so don't be surprised to see a major bounce come Monday and maybe into Tuesday.
Here are a few key ones:
Close to 90% of Friday's volume went into declining issues.
$TRIN closed at 2.05 and this indicates massive selling and a washout of selling.
$NYUPV closed at 74 when any reading below 80 indicates extremely oversold.
$NYUD:$NYUPV closed at -10 when readings at -12 usually indicate the vast majority of selling is done. In this case, -10 is certainly enough to initiate a bounce.
The daily $NYAD, not to be confused with the cumulative $NYAD, dropped to -2252 when any reading in the -2000 area signals an extremely oversold market..
And there are a couple of others, but this should be enough to initiate a bounce.
A 50% retrace of the move down takes $SPX back to 1820 and into the consolidation zone. If $SPX can get traction there, then we might see a move up and out of the consolidation zone, but, at the first sign of weakness, those who didn't sell or get stopped out Friday and are worrying over the weekend, are likely to sell as soon as it becomes clear that the market isn't going back to recent highs, at least not anytime soon. That selling, should it materialize, is likely to push $SPX down the next support area at around 1770. However, this is not a very strong support as $SPX only spent a few days there before moving higher.
I have no idea about whether or not $SPX is headed lower come Monday or after a bounce, but if $SPX cannot hold on to any highs it might achieve and then should drop below this near term support area around 1770, then the next level of support is the support zone between 1646 and 1627. Unlike 1770, this is major support as $SPX moved out of the area in September, came back to in mid-October, and then took off from there. Buyers who have been kicking themselves for not getting in the first time $SPX got down in the low 1600's will likely be waiting there with cash in hand. And if we do happen to drop down to the low 1600's then shorts, who will be very aware of the importance of this area, are likely to buy-to-cover there, just to be safe, and their additional buying will be enough to stop any further declines.
Right now, this is just the potential of the potential and little more than pure conjecture. For all I know, buyers will storm in Monday and push the major indexes up to new all-time highs by the end of the week. After all, this is what has happened like clockwork since March of 2009, with few exceptions, and we have the FED meeting and AAPL & GOOG report. At the same time, the markets have not seen a 10% correction in almost two years so maybe it's time we had one.
Except for NUGT & JNUG, I'm in cash so my personal strategy is to wait and see if $SPX can push back into the consolidation zone that runs from about 1811 to 1850 and then break above that zone. If $SPX can do this, and especially by the end of the coming week, then that will be a major sign of strength and a shot of confidence to the market. Yes, I'm giving up a lot of ground especially since 'buy-the-dip' has worked so well over the past nearly 5 years, bu tin waiting for this kind of confirmation I would feel that being long is once again the place to be. Right now I just don't see it as I think any bounce we get this next week is going to be sold into. However, the proof will be in the pudding.
GL in the week ahead.
Here are a few key ones:
Close to 90% of Friday's volume went into declining issues.
$TRIN closed at 2.05 and this indicates massive selling and a washout of selling.
$NYUPV closed at 74 when any reading below 80 indicates extremely oversold.
$NYUD:$NYUPV closed at -10 when readings at -12 usually indicate the vast majority of selling is done. In this case, -10 is certainly enough to initiate a bounce.
The daily $NYAD, not to be confused with the cumulative $NYAD, dropped to -2252 when any reading in the -2000 area signals an extremely oversold market..
And there are a couple of others, but this should be enough to initiate a bounce.
A 50% retrace of the move down takes $SPX back to 1820 and into the consolidation zone. If $SPX can get traction there, then we might see a move up and out of the consolidation zone, but, at the first sign of weakness, those who didn't sell or get stopped out Friday and are worrying over the weekend, are likely to sell as soon as it becomes clear that the market isn't going back to recent highs, at least not anytime soon. That selling, should it materialize, is likely to push $SPX down the next support area at around 1770. However, this is not a very strong support as $SPX only spent a few days there before moving higher.
I have no idea about whether or not $SPX is headed lower come Monday or after a bounce, but if $SPX cannot hold on to any highs it might achieve and then should drop below this near term support area around 1770, then the next level of support is the support zone between 1646 and 1627. Unlike 1770, this is major support as $SPX moved out of the area in September, came back to in mid-October, and then took off from there. Buyers who have been kicking themselves for not getting in the first time $SPX got down in the low 1600's will likely be waiting there with cash in hand. And if we do happen to drop down to the low 1600's then shorts, who will be very aware of the importance of this area, are likely to buy-to-cover there, just to be safe, and their additional buying will be enough to stop any further declines.
Right now, this is just the potential of the potential and little more than pure conjecture. For all I know, buyers will storm in Monday and push the major indexes up to new all-time highs by the end of the week. After all, this is what has happened like clockwork since March of 2009, with few exceptions, and we have the FED meeting and AAPL & GOOG report. At the same time, the markets have not seen a 10% correction in almost two years so maybe it's time we had one.
Except for NUGT & JNUG, I'm in cash so my personal strategy is to wait and see if $SPX can push back into the consolidation zone that runs from about 1811 to 1850 and then break above that zone. If $SPX can do this, and especially by the end of the coming week, then that will be a major sign of strength and a shot of confidence to the market. Yes, I'm giving up a lot of ground especially since 'buy-the-dip' has worked so well over the past nearly 5 years, bu tin waiting for this kind of confirmation I would feel that being long is once again the place to be. Right now I just don't see it as I think any bounce we get this next week is going to be sold into. However, the proof will be in the pudding.
GL in the week ahead.