On the highest volume since the first collapse back in August, the market is once again in free fall mode. Last ditch support is at 1100, with about 1136 as the last support level to go, which may now be resistance when 9or if) we head back up, and we have what may be a support level just below where we are now at. Another big volume day like today will take us below 1100, where we are gog to be in severe danger of a major catastrophe. However, there were some signs of late buying as we lifted off the low into the close. Tomorrow will be a crucial test to see if this buying zone that has existed since that August bottom still exists.
The Nasdaq 100 had the convergence of three moving averages to provide it support, so instead of trying to go through them, it gapped way below. Now that support will turn into resistance. The youmg, and very strong, uptrend this has been in is now over.
The Russell 2000 also got a big gap down, and challenged the critical support level the August low. It might get a b ounce here, but it is on the verge of collapse. It looks like the next leg of the bear market (I don;t see how you can call this anything else now) is upon us.
Thoe percentage of stocks on the Nasdaq above the 50dma usually, in a bull market, dips below 30 in a correction and bounces back quickly. Iyt has now been under 30 for almost 2 months, and is now being thrashed again. To put this into perspective, it took only about 2 weeks to drop from over 50 down to less than 10, then another month to get back to almost 30, but failed and is heading for single digits again. 30 is a pathetically low number for this indicator, and it can;t even manage that. That does not happen in bull markets.
The same indicator on the NYSE, which is quite a bit weaker than the Nasdaq. The failure to get back into the "transition zone" (above 35 here, above 30 on the Nasdaq) was a clear warning that this market was in trouble. Now we need to see if this can stay above the previous low when the market bottoms next. that will give us a clue as to whether the next rally will have legs or die on the vine.
The carnage was very broad based today, with very few stocks being spared. We will find a bottom somewhere, but when and where is unknown, and unfortunately, we are in crash season.
I will have the new highs update shortly.
2 comments:
I noticed a bear flag break down on NASDAQ. What do you think about the validity of this confirmation?
Hi YYBC
It sure looks like a bear flag to me, although I am not an expert on chart patterns. I am going to dig out Bulkowski's book the first chance i get and look it up, but it is a breakdown, flag or otherwise. Bulkowski projects targets based on the size of the pattern, something I haven;t done any research on. But I would have to agree with you, this is a confirmed breakdown on volume.
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