Daily update 8/16

A little lower still.  This is the first over sold buy signal in over a year that did not mark the closing low.  Usually this signal will bounce within two days.  That means the bounce should start on Monday.  Warning.  If this market continues down next week it is likely to do so very violently.  This buy signal is a very short term oversold condition.  If the market does not bounce from that condition it usually means something is seriously bothering it.  The last time it failed to bounce was 7/29/2011.  The market really fell out of bed after that.  That was the debt ceiling debate so it was pretty clear what was bothering the market then.  If we fall out of bed here the most likely cause is probably the crashing bond market.  If that happens that could mean that yesterday's big gap down was a break away gap and is likely to go unfilled for a while.  We had a rather flat trading range at the highs so that is a price pattern conducive to a break away gap.  The jury is still out on that so next week is important.  Here is the daily SPX chart.

SPX is sitting right around the 50 SMA.  Will the bulls rally the troops for a bounce?  It started a bounce late in the day, but it failed to get any traction and sold off a bit going into the close.  Here is a look at the SPY 60 minute chart.

There was a rally bar late in the day on an increase in volume.  Even though the last bar did not follow through there is some potential for this pattern to be a bottom.  It needs follow through early on Monday.  It is still ambiguous at this point.

In The dilemma of major tops and bottoms I wrote "This bull market kicked off with a big gap up that was never filled.  Will it end with big gap down that goes unfilled?".  If yesterday's big gap turns out to be a break away gap it could have serious implications.  There are a lot of things consistent with the 2000 and 2007 tops.  We should know more next week.

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

Have a great weekend all,
Bob