Daily update 6/12

Down she goes.  That was some gap fade this morning.  This was another very strong breadth reversal.  After the open we had 74% of stocks positive.  At the close we had 81% negative.  That was even more severe then the key reversal day at the top.  We also had 376 new lows.  The only time we had more new lows then that during this bull market was in the Aug.-Oct. panic mini crash in 2011.  By the time we had this many new lows SPX was well below the 200 SMA.  We are still above the 50 and nowhere near the 200.  The TRIN was low again at .91.  Since the key reversal day at the top every very negative breadth day has had low TRIN.  Before that day those kinds of days had a TRIN of 1.5 or higher.  We had panic selling then.  We do not have panic selling now.  The market is acting extremely bearish and yet everyone is calm and quiet. In Daily update 5/22 I wrote

"Since I have never seen a downside breadth reversal that strong I can't really say with any certainty what it means.  They say one day does not make trend.  However, one day can be a game changer.  That is what happened on 3/10/09.  We did not know at the time how much of a game changer it was.  We won't know for quite some time whether today was a game changer or not.  All I can say is that it could be.  I would not just dismiss it out of hand until we close above today's high on several important indexes.  Obviously we would need to close below today's low to have any meaning at all."


We did not close above that key reversal day high and now we have had a second extremely powerful breadth reversal.  In addition to the big increase in new lows I am seeing a lot of falling knife type stocks.  The market is quickly falling apart.  I believe that key reversal day was a game changer.  We should not be seeing this many new lows this close to the highs.  I think we made an important high.  We may still get a retest down the road, but I do not think we will significantly top it.  The market is acting more like a bear then a bull at the moment.  Here is the daily SPX chart.

We closed just above the 50 SMA and lower blue channel line.  On 6/5 I wrote "SPY consolidated the last few hours today.  Is that a consolidation to bounce or break down from?  We are really over sold in the short term.  I have some buy signals firing tonight.  However, these are not the most reliable signals.  My favorite over sold signal that fired on the day of the Nov. and Dec. lows has not fired yet.  With the weekly VIX chart showing the 6 MA above the 18 SMA it is highly likely that signal will trigger before the ultimate bottom is reached.  I can't recall the market ever bottoming in that condition without the buy signal triggering."


We had extended price and I had some over sold buy signals just not my best one.  We did indeed get a dead cat bounce, but here we are again.  This time we do not have a blue price bar or any over sold buy signals.  We also had a low TRIN reading today despite the very negative breadth.  I don't see anything to suggest we made an important low today.  I would expect any bounce to be short lived from here.  I still think a test of the last swing low is coming soon. 

Everybody that bought that big gap down yesterday just got clubbed in the head today.  Buying dips are obviously not working as well as they were.  Will people start to become a little less inclined to rush in now?


Chart practice has been updated with MOS the stock today.
http://traderbob58-chart-practice.blogspot.com/


Bob