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Wednesday, January 19, 2011

Wednesday, After the Close, Are the Bears Back???

Today's move did awaken the bears, but they still do not seem convinced it is time too come out and play, maybe tomorrow :)
The Percent of Stocks below their 50 day MA, crossed below the over-laid 20day MA, these crosses are normally associated with a trend change. The RSI is also trending down, if that was the top, the divergence this time was spectacular!!!
A beautiful chart, nothing like seeing Goldman take it in the shorts, down 4.69%.
The SPX did print one UGLY bearish candle that engulfs the two previous days candles.
There was a lot of technical damage done to the SPX today, but first I would like to say, that a one day sell-off does not dictate a major trend change, that takes follow-thru and making some major lows to confirm a top is indeed in place. However, on the short-term, today's price action should be a large warning that the uptrend is in serious jeopardy now.
Today's sell-off was much more impulsive then anything we have seen for the last few weeks so the bears do have a chance that we might of put a top of some sort in yesterday. It is too early yet to tell just how important that top was, or the size of any sell-off left to come. It will take 2-3 days of serious follow-thru to the downside to make a case for a large trend change, and there is a LOT of support the SPX needs to break thru before even considering a test of the December highs, let alone a test of July's low.
The SPX did break down and out of the black shorter-term channel opening the door to test the lower green channel around the 1270 level which also happens to be where the 20 day MA closed today at 1270.48. The biggie for the bears is still down at 1261.70, the last major lower low, and the bottom of the 4th wave(blue). This is when we can start considering that a larger trend change is taking place.
Breadth finally made a decent increase today, closing at 3.44:1, but on average volume of 1.08B shares traded on the NYSE. The Breadth numbers are encouraging for the bears, but still on the low side, combining that with the average volume and it is hard to say that this sell-off might have some legs to it, the bears really need some follow-thru with higher readings to support their case, other-wise the bulls will over-power the bears and buy the dip.
I did post a few important charts this morning that are worth checking out, BTW the VIX DID close above the 20 day MA.
The Trend Finder II is updated and there are some changes today, the new signals are weak and I would like to see a second day of stronger signals before committing to a trade.
I very seldom highly recommend anything on this blog, I throw things out and let each person make up their own mind, however I did download the new How a Simple Line Can Improve Your Trading Success free download from EWI and I believe that every chartists should check this one out!!!

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