As I said the last post, this market is a bit confounding…
Yesterday expected the market to go down and when it didn’t I quoted Trader Vic Sperandeo’s notion that when the market doesn’t do what’s expected it does the opposite twice as much. Based on my three daily signals being on buys for today I expected the market to go up and it did at first, off the open, and then it did way more than the “twice as much” to the downside. As a result, stopped out of the daily longs early (see tweet in post below).
Great day for the bears. Is this a sea change? Could be. Been a long time since this bull pulled back to oversold and didn’t quite come roaring out of there. Instead, it had one quick bounce and then began to trudge. Today took care of the trudge in most stocks and ETFs and wiped out most of the bounce besides.
So what now? Again, some possible confounding… The market is not quite oversold despite today’s plunge – the stocks are in middle ground with 25 on buys and 25 on sells (not the 40 or more on sells that signals the beginning of a bottom) — so it may have more to go.
Tomorrow is an options expiration so one suspects we will see choppy with not much either up or down to be the order of the day. And that choppiness, if it comes, could be a prelude to a bounce into the close tomorrow or next week, and it could as easily be a digestion of today’s drop before continuing down hard next week.
It is as if the market has noticed how unstable the American government is, but then it’s been unstable for a lot of the points to the upside. Like I said, confounding.
What has not been so confounding is the fact long-term breadth has been going down for 12 trading days. Eventually, as it continues, that takes its toll. So as of now regardless of chop, regardless of bounces, that still is the context and it continues to be bearish.
SWING TRADING SIGNALS:
PRICE: SEll. (Day 1).
SHORT-TERM BREADTH: SEll. (Day 1).
VOLATILITY: Sell, (Day 1).
LONG-TERM BREADTH: Sell (Day 12).
CNN MONEY’S FEAR AND GREED INDEX: (19, extreme fear).
NIFTY-50 STOCK LIST: 25 Buys; 3 Overbought, 8 Oversold, 2 new buy today, 14 new sells.