The market finally got a long awaited bounce, and as expected, it came on low volume. The probability here is we rally into the 50dma, which is now starting to turn down, and most likely fail there for another leg down. Ultimately it looks like we are probably in for a test of the 200dma, but we will be watching for a follow through day starting Monday in the meantime.
Both the Nasdaq 100 and Russell 2000 formed those ugly black candles after big gaps up, a sign of continuing distribution, making a follow through day that much more unlikely. From the volume and the selling after the open, my guess is today's bounce was mostly short sellers taking profits.
the percentage of stocks above the 50dma on the Nasdaq has been teasing us with a possible correction for a couple of months, but never qite pulled the trigger until this week, when it came unglued. We are now below 30%, which is undisputed bearish territory. Howw long we stay here is unknown, but any forays above 30 usually mean the correction is about over, so i will be watching this.
The same indicator on the NYSE made an even bigger collapse this week, and is well into bearish territory. This had been holding up better than the Nasdaq, but not anymore.
Since the Nasdaq 100 is only 100 stocks, you would expect the percentage moves to be mjuch bigger, and this one certainly is. I don't have enough historical data to compare this to other corrections yet, so it may be a while before I know just how bad this collapse is.
The market internals are confirming what we already knew - the market is in a correction. We finally got a decent bounce, but it doea not appear to me that the bulk of the selling is over.
The new highs update might be later than usual tonight.
I am not a financial professional, just a guy that trades my own account.
I am also not a musical professional, just a guy that makes music on the computer. Thus, two blogs, one trading and on musical.
And, no, the picture is not me, it is the late, great John Belushi, one of the inspirations for these blogs.
This blog is focused on technical analysis of stocks and markets, putting heavy emphasis on chart analysis. My trading style is derived primarily from my mentor, William "Yoda" O'Neil, and the focus here is on leading and breakout stocks, but all forms of trading are covered to some extent. Economic and political news that effects the market are also topics here, and the blog may occasionally become a platform for my political and philosophical ranting. I keep several spreadsheets on Google docs which track various aspects of the market and readers are welcome to vies and comment on them.
Google Docs Spreadsheets
There are several spreadsheet that I maintain on Google docs to track various watchlists and trends in the market.
1. The earnings list - a group of small and micro cap, low float stocks that have exhibited recent rapid earnings growth. They are modeled along the lines of William O'Neil's CAN SLIM system, but limited to small cap, highly volatile stocks.
2. The relative strength list - a group of stocks which are near 52 week highs and have shown an increase in average daily volume. The list is limited to the top 200 stocks according to my methodology, which will be detailed on one of the pages of the spreadsheet.
It can be accessed here, and is also updates weekly.
3. Relative strength by industry - Uses industry data from Finviz.com to track the percentage of stocks within each industry that are in the top 25% of the 52 week price range, looking for trends.