Based on my read of the tape today, the still valid Bearish Gartley Butterfly Pattern in the XLF ETF and a mix of other important factors such as market breadth, I have to conclude that the near term state of the market is very bearish outlook.
I think we are building up to a scenario where the market plunges on a Greek debt default and gold skyrockets to new all time highs.
If we do start to decline in earnest the rest of this week and into early March 2012, then it is still an open question whether or not the market can hold its ground to plow much higher again. It appears that this will be the case when we look at the NDX 100 index. The NDX 100 has room to move down all the way to 2400 as a normal retest and keep the overall structure bullish longer term.
The near term outlook shows multiple small hammer candlesticks on the SPY and DIA etfs that almost resemble the very bearish tri star doji candlestick patterns.
Today we also saw a high volume bearish reversal and engulfing on the NDX 100.
I think we have enough evidence as of today’s close that we are about to do down and possibly go down very quickly. How deep and wide still remains to be seen.
A Greek debt default scenario would be enough of a fear factor to engage more heavy selling regardless whether or not it has real and tangible economic consequences down the road for the USA.
Inverse ETF’s such as the SDS look very attractive to me right now.
The TVIX also looks attractive as a play on increased volatility.
The implications of the bearish gartley butterfly are proving valid although it did take the market some time to realize this fact after some initial churning.