Yesterday was a doji candlestick day and not much progress either way. The volume on the SPY ETF was again horrible and weak relative to the very high volume SPY swing low in mid March 2011. We are not pushing down with enough volume. This correction is too orderly. The bottom may in fact be in for a while.
I am switching to BOT long on the sp500 as of right now at 1287. We may not even reach 1250 because there is not enough energy to do so. The IWM is signaling that as well (see below).
This whole decline just appears corrective and not impulsive. We are currently trading back inside the large swing trading channel I wrote a post about before. We could trader higher into the channel again.
We may have bottomed right on the Marty Armstrong Date of June 13, 2011.
Also the IWM tested its recent swing low on 50% or even less volume. This is a bullish sign and confirms previous points I was making about how the SPY was not pushing down with enough volume and was not enough relative to the 500 million share day on March 16, 2011.
I was a bit too quick with my switch to a BOT long signal a couple of days ago, so it looks like I was a couple days too early, but now I think I have the right signal.
This could be a bottom of ‘some duration’. I am not quite sure how much duration right now, but maybe longer than we currently realize.
Today’s bounce was on extremely light volume. This tells me that there is no conviction in the bounce, which means there is probably more downside left. Any long entry should be handled with care. If we sold off on exhaustion volume to reach 1250 level and then bounced on big volume, then I’d feel much better about a long entry. Now if the markets bounce for a few days on this light volume and create a bear-flag, then 1250 support won’t be as strong and we may break below that level. Remember, that this is options ex week and institutions will manipulate the markets to best suit their needs. So this reversal today can’t be taken “seriously”. Of course the markets can go up, but a long position today seems a bit risky for my liking.
good points RMT. Yes the bounce was on light volume, problem is that this has been the pattern of market action for the last few years – heavy volume drops followed by low volume bounces and then sometimes the bounces can sustain themselves on light volume longer than most realize..
getting above and through 1294 appears to be the first significant hurdle for the market to stop the downside momentum..
Quote: getting above and through 1294 appears to be the first significant hurdle for the market to stop the downside momentum.. UNQUOTE
strange but not surprising that you BOT long at 1287 if you think, per above, that downward momentum not arrested until 1294 is cleared.
anyway, glad you have flipped to BOT long side as i remain with shorts
Tom,
Your point about light volume rallies just proves how unhealthy this market really is. A market that falls on heavy volume and rallies on light volume is not good- another reason why I think that in the long run ( a few years from now), this market falls. Yes its true that markets have been rising on light volume, but one important element will be is missing going forward- that is money from Federal Reserve. Over the past 6 or 7 months, I was amazed by the kind of shenanigans that i saw. Whenever the markets were on the verge of a breakdown (even on intra-day level) of a significant support level, there would always be a “magical buyer” to come in and save the market. Every bear flag, head and shoulders pattens failed while all the bullish patterns played out nicely. The Dow rarely closed down by more than 100 points. But now, the exact opposite is happening, which tells me that the bias is down. It’s better to be safe than sorry. We could just as easily rally 100 points tomorrow, but I am just saying that I wouldn’t have a good night sleep if I went long today.
Another no-volume dead cat bounce today. My gut feeling is we’re on the brink of a crash.
I believe I posted this before but I’ll go ahead and do it again as it is still in play
The Vector Vest Composite of over 8,000 stocks in has broken down from a head and shoulders on the daily chart. It is now in the process of what I believe to be a classic textbook “return move” back to the neckline before breaking down
The VVC level corresponds with the 1300 level on the SPX. So look for a move up to there before we resume the downtrend