by winston » Mon Sep 28, 2015 9:55 am
MONDAY
Nothing like snatching possible defeat form the jaws of victory. After breaking lower from the wedge and selling 5 of 6 days the indices were primed to bounce to test the move.
They did, for the first hour to midday, depending upon the index. The sellers took over and ran many stocks, mostly on NASDAQ, lower.
The action left SP500, DJ30 and even SOX still with a near term upside bias. NASDAQ and RUTX gapped and reversed.
RUTX looks like dog droppings. NASDAQ's reversal wasn't good; at least it leaves itself with a shot of a near term low at the early September low.
So, the bounce we were looking for, the one that looked quite good after the Thursday session, is at least back at the drawing board. That means the overriding theme, the flattening of the indices post-QE end, the massive break lower, the rebound to set up a test of that low, is still predominant.
The question is whether there is a near term bounce to test the break below the trendline in the upward pointing wedge or a continuation of the move to test the low.
Certainly enough time has been put in to make that a solid test for a solid rally, particularly when you throw in the sentiment and internal extremes already logged in the August selling.
Overall theme is eventually getting lower to test the prior low. Near term theme, the volatility continues and we can see upside moves inside the ultimate test lower.
As another crossroads is left after the Thursday/Friday action, it behooves us to remain ready to play the overriding theme (and thus we left our downside plays running) as well as the shorter term upside move. The latter appears in jeopardy after the Friday action; such is the life inside a bigger theme.
So, it is back to the same theme, sentiment and internals hit extremes and now the indices and stocks are working on setting up their bases. Again, the same story.
We are looking at the selloff and are playing that move as well as trying to play some contra moves inside of it. Then after it is over, when the selling tests the prior low, that is when we anticipate playing some solid upside setups.
We saw some deterioration of patterns to end the week and not as many look ready to move higher. Perhaps the selloff to test the lows makes the difference, completes the cycle.
Typically that is how it works, but we will keep watching to see if there are patterns improving and whether patterns deteriorate. If there are no good patterns to lead higher on a rebound move, they ultimately fail. Thus the importance of solid upside patterns is clear. Not there yet, still working on it, but getting much closer.
Source: Investment House
It's all about "how much you made when you were right" & "how little you lost when you were wrong"