SPX closed below yesterday's low on an increase in volume. That adds confirmation to yesterday's big reversal bar. Lets look at the 195 minute SPY chart.
SPY actually moved down fast enough to get a blue bar indicating price was below the lower Bollinger band and extended. SPY managed a small bounce on the next bar. Volume was heavy on both bars today. SPY has confirmed the break down out of the trend channel. How about the current breadth chart.
For the first time this year the 10 DMA lines have a negative crossover. The McClellan oscillator is very negative now. It has been in and out of negative territory for weeks.
It looks like a pullback has been initiated. We have poor economic data, 2 quarters of negative earnings growth, corporate insiders selling the most since 2011, and an extremely crowded long trade with high margin debt. I suspect it is unlikely the long trade has ever been this crowded with such poor fundamentals. I know that is the case for the last 15 years I have been involved in the market. I don't think there is any hurry to rush in and buy the dip. I think there is considerable risk of a deeper pullback then nearly everybody is expecting. I think it is time to sell rallies.
The short term trend has turned down.
Bob
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