I have changed my mind many times in recent days about which way this market is going. But to be clear I am overall very bearish on the market going into August September 2010 and I expect the market to be significant lower from where we are trading today.
But I have been trying to time some of the swings in recent days with little success. What seems like valid reversals are turning into failures. This is not a good omen.
While it is clear that many market measures are already in the oversold region, please refer to my previous post where I talk about being open minded to new ranges in the market.
Not holding the recent small range is a very bad omen for the next week or two. If start hard down tomorrow then it appears the market wants to head into full crash mode to flush everything out. It seems like that is what the market needs before any sustainable reaction rally can develop.
It would seem in hindsight that trading this market based only on the weekly chart was the best medicine. The weekly chart has a glaring bearish divergence between price and the MACD. Bearish divergences are the strongest signals in technical analysis. They lead to very persistent price action, and sometimes crashes which is exactly how the price action has been shaping up recently.
The daily trading tape ‘noise’ is merely a distraction. The weekly signals have been valid and have proven to be the best way to play this decline.