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It was an amazing day in the market if you are a bear. Not because the decline was anything to write home about, but because the latest daily trend was broken.
The trend – open lower, close higher.
Today’s price action - open higher, close lower.
Of course, we will need some bearish confirmation over the next several trading days, but I think with the current amount of lopsided bearish indicators in the market the probability of a continued mover is high.
Almost every indicator I follow is now in a bearish state and there are more notable bearish stats from sentiment analyst Jason Goepfert to add to the list
Data released today showed an increase in home builders' sentiment with respect to current and future single-family homes (the graph is not currently available as I write this post, but here is the link to it on www.forexfactory.com).
Possible scenario for the S&P 500 Index…it drops and holds below the Weekly consolidation level of 1340ish, as shown on the chart below, down to a Fibonacci and price confluence level of 1260/50 to form a potential right shoulder of an IH&S pattern or the handle of a cup & handle pattern before resuming its upward trek.
I highly recommend the full post; but in a nutshell, survivorship bias in the indices:
“Specifically, in the process of rebalancing (selecting and or deselecting stocks) the indices it is the tendency for failed companies to be excluded from indices because they 1. No longer exist, 2. Their market capitalization has fallen or 3. Their industry is in decline (which likely caused the first two reasons); this is considered Type 1, survivor bias. Inherent in this type of bias is the error you make in just counting the survivors.”