Market Crashing Intraday Update for October 15

“This time, it’s different” and it is very different.

When price failed to hold a critical “Make or Break” support level (mentioned yesterday), the outcome was  “Break” and what a powerful breakdown it is!

Let’s jump straight ahead into a market with no floor and put the pieces of the broken market back together.

We’ll start with a few quotes I wrote to members in the game-planning section of last night’s report:

“However, should buyers fail to take advantage of the probability for a reversal, then we’ll quite simply play [aggressively] short and anticipate a literal collapse of the market… there would be no downside target if this support level [1,875] fails.”

“…prepare yourself to preserve capital or aggressively short-sell because the end-result of a breakdown under 1,875 is a literal collapse that could crush the market toward 1,800 very quickly as buyers realize they’re trapped and their game [buying every dip successfully] has ended….”

The “Collapse Scenario” is precisely what occurred – when sellers took the market under support, buyers panicked and the result was a literal collapse or vacuum in buying which sent shares lower, melting down toward no known target (1,875 was the last logical target ahead of a violent sell-off which we’re seeing now).

Just like a market trading straight-up in a short-squeeze, a market trading lower in a liquidation impulse has no known/obvious target and it’s difficult for new traders to enter in a fast-moving (collapsing) market without retracements.

I can’t recall our Breadth Grid being more bearish:

The only sector that’s different is Energy and that’s only because 16% of stocks (in the S&P 500 Energy Sector) are positive right now.

All other sectors show virtually NO stocks positive which only underscores the collapse in stock prices and the rapid rush to defensive/protective (Risk-Off) positions.

There isn’t a single stock you should look to trade long/bullishly today (which is why we have no bullish stocks in our scan).

There are dozens of bearish downtrending stocks today (hundreds actually) and here are four of the top according to our algorithm:

Covidien (COV), Kroger (KR), American Express (AXP), and Lorillard (LO).

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).