Daily update 10/19

Interesting that on the 25th anniversary of Black Monday we had the biggest down day in several months.
In Daily update 9/17 I wrote the following.

Thursday there were over 800 and Friday there were over 900 new highs.  I noticed this, but did not mention it until I had a chance to look back at history.  Since 1990 there was nothing even close this event.  It is very rare to get over 500-600.  The majority of times it has gotten over 500 have happened since 2009.  I mentioned the high volume could be a short term volume climax.  The new high data indicates it was a buying stampede.  There is a risk that was some kind of upside capitulation event.  Since 2009, the mildest sell off after getting around 500 new highs was Nov. 2010.  The other times were the bigger sell offs in the spring of 2010 and summer of 2011.  I guess we will find out what happens this time.

It has been over a month and we never did get back to that 9/14 upside capitulation day high.  Now we have a short term triple top within the context of a major top.  Today looks like the kick off of the next bear market.  I hope most of you developed your personal plan I suggested a few weeks ago in case I was right about the market forming a major top.  It is much better to plan your actions before the heat is on.  I think there is going to be considerable heat in the next 12-18 months.

Both the short term and the sub intermediate trends are now down.  Shorts are likely to be more profitable then longs for now.  Repeat after me.  Sell rallies.  Here is the daily SPX chart.

I think that was a herd of elephants stampeding out the door.  Do not get run over.  The first leg down off the final bull market high can be pretty steep sometimes.  I have no idea exactly how this will play out.  Here is what I do know.  This high is weaker then the 2000 or 2007 tops in monthly ADX.  This is the first time in history the FED is all in before the market crashes.  Bulls have been buying dips figuring that if things got too bad the FED would come to the rescue.  What happens if the market starts crashing while interest rates are already low and the FED is already printing money?  The exit may get pretty crowded.  The lower support line at 1420 will surely be tested, but I don't think it will hold for long. 

Chart practice has been updated with WFM the featured stock today.  You might want to analyze it with your own charts before reading my comments.  http://traderbob58-chart-practice.blogspot.com/

Bob