We had a better than expected 8and sure to be revised downward) NFP number released this morning, resulting in a rally than lasted, oh, about 5 minutes or so, followed by a sell off which threatened us with another day like yesterday. At high noon the market rallied back to just about even, where it stayed for the rest of the day. We actuallyu traversed a pretty wide range today, and again got huge volume. The support level I have at 1200 has been broken twice in a row at the close, but the scale of this chart won;t show the next level of support (around 1150). Notice the death cross of the simple averages is imminent: we will likely get it next week.
We have fianlly cracked the 10 week average, and this coming a month after a big up move. At the time, I mentioned the volume on the up move, and that sure has come into play. The next major support level should be around 1125 or so. This is looking more and more like a classic head and shoulders pattern, and as I understand it, the volume, from left to right, should decline, which it did a bit, and should increase big time on the break of the neckline. I don;t pay much attention to H&S patterns unless i can see them on the weekly chart, and it's pretty clear here.
I have include the weekly price relative line on the rest of the charts. The first thing that I see is that the Nasdaq, which had consistently lead from the March 2009 bottom, stopped at around the beginning of this year. It has gone sideways since, neither bullish nor bearish, and is still holding up fairly well. But that isn;t the only one I'm watching.
When the price relative on the Dow industrials is rising, that is usually pretty bearish, and an incication that traders are looking for relative safety. It has been moving steadily up since the beginning of this year.
Except for a few brief periods, the Dow transports have consistently lead, especially during the 2010 correction, which was probably an indication that that was a correction and not a potential bear market. This time it is headed down, and volume has gone ballistic. If we reverse and go into another leg up, I will guess that we see it here first.
Even if the other charts were ragingly bullish, when the Russell 2000 looks like this I am bearish. This is very close to breaking support (I'm guessing it is at that satanic level 666), and, no pun intended, all hell will break loose if that goes. Notice also the Russell 2000 leads during bull markets (and warns of imminent corrections). It has not yet collapsed to the point where I'm going to believe an apocalyptic bear market is coming, but it is awfully close.
The stock market is usually the last market to get it, but the other markets have been warning of an economic slowdown for most of this year (I don't include Forex in that, that looks more like a casino than a market). The forst round of deleveraging appears to have started, and who knows how long it will continue.
I will have the new highs update shortly.
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