The action today in the market so far is quite curious. I mentioned yesterday that the big rally we had yesterday was probably a ghost rally. Today’s action seems to be confirming that theory. Why? Well with all the bullish AAPL news we see AAPL only up 3% and the QQQ DOWN half a percent. Something is not right and I am glad I still have the BOT short signal in force.
I would not be surprised to see the sp500 fully engulf yesterday’s big up candle and close very hard down into the end of this week perhaps right at the 1295 level !!. The volume today so far is horrible on the SPY ETF, horrible follow through!
August is notorious for volatile low volume trading in BOTH directions. Sustainability of trends should be questioned with every move.
The monthly tape is setting up for a huge drop that starts to evolve in the early part of August 2011 ! It is quite possible that today is a ‘dream shorting opportunity’ and one big red down candle into end of this week may confirm that hypothesis.
We also may have a possible evening star candlestick formation on the sp500 (or even a modified version of the evening doji star) which typically leads to a hard down day the next day. One might even call it an ‘abandoned baby’ candlestick pattern. Problem is today’s doji was not much of a gap up. But I can easily see this market down tomorrow and then HARD Down Friday to close the week.
It would be extremely bearish if we are able to retrace the entire rally that began on June 27, 2011.
Sometimes right shoulders of head and shoulder topping patterns have the habit of forming very quickly!
Remember September 29, 2008 ? That was the day the DJIA was down 700 points on a failed passing legislation to bail out the economy. It was a HUGE hard down red candlestick and it occurred when the daily histogram was in a sell mode under the zero line.
But now we seem to have a similar situation that is evident on the weekly time frame and today’s hesitation candlestick pattern could suggest we are are about to do a repeat.
I am still researching the possibilities here, but I would be very careful in either direction from the current juncture. More sideways does seem to be the popular stance right now, but keep in mind in mid August 2007 there was quite a big down move. The market will move if it has enough reason to do so.
And if the debt deal gets screwed up? Maybe 1000 points down on the DJIA to kick start the decline.
How ironic it would be if the June 27 2011 rally to the July 7, 2011 rally was the biggest fake out rally and teaser rally trying to get everyone on board before the big dump.