Yesterday's late selloff looks all the more suspicious after the collapse today following the FOMC announcement, in which the Fed has basically said it has nothing left ("operation twist" is about the best they could come up with). Buying up treasury debt and holding rates artificially low has 100% failed until now, so naturally we need more of it. In the meantime, we can say hello agin to the bear, as we have again failed at resistance. Now we will see if we can find support somewhere between 1100 and 1140, as we have for the past two months. My guess is we will not.
Even the strong Nasdaq is flashing am Elder impulse sell signal. Notice that here it is the 200dema that is the brick wall. This is still in a short term up trend, but I expect that to be broken soon.
The Russell 2000 is where the real weakness is. this is now barely above the August panic low, price relative is breaking down, and momentum to the downside is just beginning to build. If this doesn't hold the August low, we are in real trouble.
| Ticker | Relative Strength Index (14) |
| XLU | 53.86 |
| XLK | 50.47 |
| XLP | 45.57 |
| XLY | 45.32 |
| XLV | 44.57 |
| XLI | 40.27 |
| XLF | 36.9 |
| XLB | 36.17 |
| XLE | 35.71 |
Here are the sectors ranked by RSI. Despite getting blasted recently, both XLF and XLI managed not to finish at the bottom.
XLU continues to be the strongest sector, but a bear market will eventually get around to it, and that may be starting now. The positive is that it will go down slower than everything else.
Both XLE and XLB have taken severe beatings in the last two days, putting them below the already horriby weak XLF and XLI. XLE is forming a very bearish chart pattern here. The August low is looming and if it can;t hold, watch for the rest of the market to follow.
It was an FOMC meeting in October of 2007 that turned a potential correction into a bear market, as Bernanke was unwilling to go overboard to pleae the market. The same thing may be happening now, but now it is a case of Bernanke being unable to do it. And don;t count on Congress to help: they would love to see an epic market crash just in time for the next Presidential election. Ain't politics grand?
I will have the new highs update shortly.
6 comments:
Hi,
Last time I mentioned TVIX I got bit in the butt. Well, surprisingly we have 5 D-Days again. Hopefully this time it will work better.
Happy trading!
Hi Y.Y.B.C.
I almost got into TVIX yesterday, but did not want to trade in front of the FOMC decision. Then I almost went long after the decision because the first move is usually in the opposite direction that the market eventually goes after the decision, and today's first move was down, but it never reversed, so I am still in cash. I should have went on my hunch yesterday that somebody had inside information yesterday and sold off on it.
I bought a pilot position in TVIX right before the close. If we do get another down day tomorrow I plan on pyramiding into a bigger position. TVIX is extremely volatile but also very profitable in a down market so I'm trying to handle it better this time.
On a side note, several CANSLIM stocks such as ARCO, ULTA, and UAN are also under pressure so that might mean something.
XLu and XLK got hit pretty hard, too, so even the strong areas of the market are not holding up right now. I will be watching as we approach 1140 to see if the buying down there sarts again, but we might not see any until it gets to 1100, if there. After failing at resistance for a third time, I;m not very optimistic about it holding here.
IBD changed their big picture to "Market Under Pressure" but they said today is only the 4th distribution day in Nasdaq. I count 5, on 9/6, 9/8, 9/9, 9/20 and 9/21. Am I doing it wrong? Sorry that I keep bugging you, but you seem to be very experienced and I have so much to learn from you. Thanks!
I count 6, but one is in August, so they probably dropped that one. They might not be counting yesterday since the volume wasn't much higher than the day before.
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