After Tuesday’s sell off, the markets ran in place on Wednesday – forming many indecision candlesticks on a variety of charts. Thursday’s pre-market future look spikey and a bit unrealistic. Let’s first review the $INDU analog and WAG I threw up on Tuesday.
Analog Update (still a near perfect match)
While I readily admit this WAG has low credibility, the current shock event continues to mirror the Dow’s 7% correction in January of this year. I have also added a 17-43 crossover (a trend change signal) on the chart which was validated Wednesday. The $INDU’s long trend up is officially challenged. For reference, the 17-43 crossover is from author/trader Jea Yu.
I would NOT be surprised to see a big market fade today, once we get beyond the day’s POMO noise.
Market Notes
- Shock event remains alive
- Bulls getting some help retracing towards $SPX 1930 with 2 days of POMO
- Institutions are distributing assets
- Market internals remain VERY challenged
- Market prices remain destabilized (expect more price shocks)
- Upward trend for $INDU is questionable after Wednesday’s 17-43 crossover
- A continued market pull back remains probable
- Watch the NASDAQ next (see below)
Highlighting Weakening Sectors
- Volatility, while suppressed Wednesday, formed a higher low (so it can still climb higher)
- Transports continue to see an exit from the sector (even during Wednesday’s bounce)
- Despite leading the bounce, small cap’s are clearly rejecting first resistance (IWM $112.18)
- Tech sector is near a ledge and tested it early today (QQQ 93.63 to 94.00 is a zone)
- Semi’s have already tumbled 7.6% (a clear correction).
- NASDAQ New Highs / New Lows still well below zero line (a very negative signal)
In The Strike Zone, Please
I would hold forth that the NASDAQ is long overdue for a MAJOR tumble here. You can call that my own gut feel supported by several charts and technicals, if you like. However, it also remains surprising to me that tech has maintained its recent parabolic pattern and the M&A madness has only escalated (till this week), while the $INDU has now challenged its trend up (see above).
The news feeds Wednesday evening are now showing articles questioning the continued pace of M&A activity (e.g., several deals have been called off in the last 3 days). Maybe this is the change agent needed to end the fuel underneath the parabolic pattern of the NASDAQ charts. Furthermore, the market internals (many of which I have shared in the last week) strongly suggest that the NASDAQ should be much lower than it is. So, to put it simply, I am looking for major fireworks from the tech sector in the coming days. I am specifically watching that ledge on the QQQ chart above. And if I am wrong about this (swing and a miss!), I can live with that outcome knowing that at least I have my eye on the wild pitched ball flying towards me at home plate.
Good luck with your own trading (Luck = Preparation + Opportunity + a little Risk).
