Market Getting too Comfortable at Bottom of Swing Trading Range

The stock market right now is not looking constructive.  It appears now that an aggressive move back to the top of the swing trading range of the last few months is not going to happen.

In fact it looks like we are about to break the bottom of this very long and significant swing trading range which should lead to a very fast and large move perhaps similar in magnitude to the end of April to early May 2010 move.

The SPY ETF right now is showing a bearish triple P on the MACD histogram which will be confirmed on a closing below today’s low.  Volume is heavy and the end of day volume number will be interesting.

The long swing trading range of the last few months looks like one big rectangle formation with a slightly rising slope which is bearish.  So this large rectangle appears to be just a pause in the downward trend which was initiated in late May with the straight line move down.

I feel more confident now that this market is going to bust this range to the downside.  The seasonality right now for this drop is perfect.  Paper equities are likely to be thrown out the door.  And gold seems to be catching a nice bid as I was predicting in a precious post (that gold would move inverse to the stock market).

In fact I would not be surprised to see a massive topside breakout in gold to new all time highs that coincides with a stock market mini crash or deep plunge.

I feel like we are inches away from this big drop now.  The daily MACD is in the same stance that the market was in right at the April top.  It has plenty of room to move down below the zero line.  The weekly MACD is still showing a bearish kiss and a failed bullish cross and a possible move below the zero line which is very bearish.  The Russell 2000 Index is showing very close to a weekly confirmed sell on the MACD histogram.

The market has become too comfortable at the bottom of this large swing trading range.  It is going to break it to the downside.

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There is still some confirmation that is needed but I think the clear signal right now is for a total break down.  Everything is lining up for it now.

Posted in ETFS, Technical Analysis
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One comment on “Market Getting too Comfortable at Bottom of Swing Trading Range
  1. Geoff says:

    Tom

    I hope you are right. For past 2.5 months you’ve been a pretty good contrary indicator. It is about time that you call it right. Fingers crossed.

    The fundamentals are awful. The unemployment claims this morning were horrendous, and the Philly Fed Report was equally awful.

    This market deserves to be much lower (S&P 940 or so) and gold is going to go down right along with it. A 10% haircut on gold would not be disaster.

    Fingers crossed and thanks again for your post and all the time that I assume you put into this!

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