SPX has now closed 3 days below rising wedge pattern and came down today on 2.4 billion shares when about 2.1 billion is average volume.SPX closed fairly close to the lows of the day and this suggests that we will see lower lows from here. Perhaps not tomorrow, but before we see a significant bounce, I expect SPX will drop to the 50% Fib retrace, now at 1809. Once there, I'll have to reassess.
TRIN closed at 2.51 today and normally this indicates an extreme amount of selling and this will be difficult to duplicate going into a Friday. The RSI on the VIX 60min chart closed just shy of 70 so I would expect some follow through selling early tomorrow to push the VIX RSI to or above 70 and then either the market will stall there or push higher throughout the day. Of course, geopolitical events are likely to trump all of this so if there is more bad news out of Russia/Ukraine, then all bets are off.
Regardless of what happens on Friday and perhaps as a result of disconcerting events in the Ukraine, I do expect SPX to visit the 50% retrace level and perhaps the lower trend line on this chart at about 1800 before the decline ends. However, the market is likely to have a plan of its own as it is always out to make fools of those who attempt to divine its movements.
Be careful & GL
Comments
SimGlenn
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Curtis - I certainly appears this mini-correction is well under way. In fact, it appears that it is 1/3rd complete already. I'm looking for strong support on the SPX near 1770 and I'm inclined to lift my shorts near 1785. It took the weak China data to trigger it today. Once again, this market ignored bad news on the rally, e.g., weak US economic data and Ukraine invasion. This correction has 90% the characteristics of the others, with several (but insignificant) differences. I dismiss the Dow lack of confirmation since it was above trend in December. I would however expect a confirmation the next rally.
I found it interesting that the VIX did not move into the frothy zone. The Ukraine situation may have kept investors a bit on edge. The same applies to the AAII investor sentiment which has been only slightly above neutral, probably for the same reason. RSI did confirm a near-term top. SPX distance from 200 DMA also flashed caution, but not as much as recent rally tops.
I expect if this correction continues at this pace or accelerates, it will burn out prematurely. I'll be looking for the MACD to form a positive crossover in 2-3 weeks signalling the pending reversal. I felt I was most prepared for this correction from using a comprehensive set of technical indicators. A very useful craft.
Cheers - Glenn
CurtisM
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Glenn, NYSI dropped by 38pts today and when we bottom it will drop by more than 70 and maybe more than 80. You can also watch NYUPV for a close below 80. It closed at 108 today indicating an oversold market but not an extremely oversold market. Still, a reading at 108 is oversold enough to initiate a bounce for Friday. NYUD:NYUPV closed at -4.28 today and lately, the last year or so, readings this low have occurred at bottoms. It used to be that this ratio needed to get to -12 before it signaled a bottom but parameters have changed. So these two are saying to look for a bounce tomorrow though it may not last through to the close as who knows what's going to happen between Russia and the Ukraine over the weekend.
I think what we're going to see here for a while is a series of lower highs followed by lower lows until there is a climax sell signal from the above and several other breadth indicators that I follow and that you can find on my blog under 'Breadth Indicators.'
Since the VIX 5EMA did not move into the froth zone, I am wondering what's going to happen when it gets up near 19, the turning point for quite some time. If that EMA doesn't stop there, then we're in trouble. I am also watching for a red candle on the March monthly chart as this would confirm for me that what we're looking at is going to be more than the usual pull back.
I found it interesting that the VIX did not move into the frothy zone. The Ukraine situation may have kept investors a bit on edge. The same applies to the AAII investor sentiment which has been only slightly above neutral, probably for the same reason. RSI did confirm a near-term top. SPX distance from 200 DMA also flashed caution, but not as much as recent rally tops.
I expect if this correction continues at this pace or accelerates, it will burn out prematurely. I'll be looking for the MACD to form a positive crossover in 2-3 weeks signalling the pending reversal. I felt I was most prepared for this correction from using a comprehensive set of technical indicators. A very useful craft.
Cheers - Glenn