Since Friday, I have been reminding Slopers about the shock event (down) which began on Thursday. With Monday’s bounce from Friday lows, there was some question Tuesday morning about whether the shock event could remain in effective. Well now, after Tuesday’s sell off, the answer is a strongly affirmative “yes, it can”. Let’s look at a possible chart analog for the developing shock event.
Possible Shock Event Analog (look back to January 2014 .. a near perfect match)
The current shock event and pull back nearly mirrors (exactly) the Dow’s pull back in January of this year. Sorry, that’s just eery. While I do not usually take this stuff too seriously, I will hold forth that sometimes the Universe delivers a message that cannot be ignored. That message today appears to be towards eager bulls, and it would be “Do not under estimate how far and/or when the markets might shock down again”.
Market Notes
- Shock Event remains alive and healthy
- Monday bulls are now trapped (setting up lower resistance levels)
- Selling has been on higher volume Thursday, Friday and Tuesday (3 of last 4 days)
- Institutions and larger investors are distributing assets (even in low summer volume)
- Market Internals remain VERY challenged (see below)
- Daily market prices remain destabilized (expect more shock events)
- A 2nd major shock may arrive quickly (-225 Dow points or more)
- Upward trend has NOT changed (yet)
- A continued market pull back appears inevitable this week
Chart Observations
- Volatility climbed back up Tuesday (looking ready to launch higher)
- Bond yields faded eventually Tuesday (I am looking for a possible gap down Wed)
- Transports are seeing a mass exit
- The Euro continues its pull back (strengthening the US Dollar)
- Put Call Ratio crossover signal remains VERY negative (while $OEX declines)
- Semi’s ($SOX) have continued their downward spiral from last week (a weak sector)
- NASDAQ A/D Line suggests that tech should be leading markets much lower
Selling On Volume
I have observed and noted on Slope for two weeks now, that recent daily selling has come with higher than average volume (and most up days on lower than average volume). We have clear proof of that. Here are snapshots of total daily volume for the NYSE and NASDAQ through Tuesday.
NASDAQ Total Volume (Tech selling 3 of last 4 days)
NYSE Total Volume (NYSE selling 3 of last 4 days)
That’s a sign of distribution, folks! No other way to explain it. Bigger players are getting out of their longs on the days when prices are being bounced by the JBTD crowd. If you think otherwise, there is a village out there looking for an idiot, and I would hold forth that you are well qualified for that job.
Until next time, with my bearish paws together and a slight bow of my head, I bid you “Namaste” to all (even the village idiot).
FacesInCabs
