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Monday, August 19, 2013

Bye Bye 50 day

 Double support at the 50dma and a mid point of a trading range broke, which would normally be uber bearish, and may still prove to be, but with volume dropping, it could turn into a bear trap. Seliing pressure does seem to be easing, even with a slightly accelerating drop today. However, it does leave no doubt now that we are in a correction, and another V shaped move up could be the kiss of death for the long up trend we have been in since March 2009. Of course, every other time we have dropped like this could have been the end of the bull market, but wasn't, so I am not going out on a limb this time.

The Nasdaq is now running away in terms of relative strength, and looks like i might be poise for a perfect bounce off the 50dma. As long as this keeps up, any correction in the overall market should be relatively mild: should it not continue, we will be in for a long September.

It's a little difficult to figure out the exact trading range of the Dow industrials, but that might be a moot point, as this is not trading, it is in free fall. And the bad news? The price relative line is starting to rise: that is almost always bearish.
The Russell 2000 had been, until a few days ago, holding up extremely well, leading me to believe this correction was going to be very mild. That changed on Thursday, with a big drop, and we got a follow on move to the down side today, slicing right through the 50dma. Price relative is dropping, so now the last man standing is the Nasdaq.

It is safe to say we are now officially in a correction. Most of the corrections this year have been relatively short, and this one might be as well, but so far, it is shaping up to be the most severe yet. I did no expect this to start this early, but they never do seem to come exactly when I expect them, although I did get plenty of warnings coming into it.

I will have the new highs update shortly. 

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