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Thursday, August 20, 2015

Daily update 8/20 Dow Theory sell signal

The Dow broke key support today.

This confirms the break down we saw in the transports back in May.  Market internals look like we have already been in a bear market for a while now.  I think this break down is for real and should be taken seriously.  I believe the odds are we are in a full blown bear market now. 

SPX closed below key support from back in March.  Breadth was -83%.  New highs dropped down to 10 while new lows increased to 365.  No doubt about that triangle break down.  Despite the high volume and very negative breadth the TRIN was only 1.4.  That does not give us any edge on upside tomorrow.

The futures broke key support early in the day and sellers just kept coming.  While the futures are now stretched to the downside this really looks like a true break down in the market rather then a capitulation type low.  While we will likely bounce some in the days ahead I suspect sellers will come out and keep the bounces from going very far.

Today reminds me of that old saying "it don't matter til it matters".  There have been bad things going on around the world for months that the U.S. stock market just ignored.  Today there was lots of talk about all those things.  I heard Cramer on TV multiple times saying the break down in Disney woke up a lot of people.  While he is not a good market timer, he does talk to lots of money managers.  That stock was considered one of the safest stocks in the market.  Between that and the AAPL break down confidence has been weakened if not broken.  Commodity prices have crashed.  I saw an article the other day that talked about 23 or 24 different stock markets around the world that are tanking.  There is a lot of evidence the global economy could be in serious trouble.  I think that is starting to hit home with U.S. investors. 

SPX closed right on its low today.  That means a gap up would have high odds of at least a retest of today's low.  A sizable gap down might not find many more sellers which could allow for a gap fill.  Other then that a choppy continuation day seems likely.

Today turned the short and sub-intermediate trends down across the board.  This is actually the first time since I started the trend table we have had that condition.  Needless to say the bears are in control for now.


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