Oct 15, 2014: 12:44 PM CST
“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.
Oct 14, 2014: 1:19 PM CST
The question today remains “Will we see an actual bounce or will we see yet another repeat of the end-of-day collapse outcome?”
We’ll start with our chart of the S&P 500 for key clues:
The pattern has shown us intraday bounces or rallies up off the falling trendline, only to be met with selling pressure into the close to continue the intraday downtrend.
That’s the probabilities we’ll be balancing in today’s session as we see a rally up into the 1,900 target but a retracement down against the trendline and 1,900 confluence (our focal point).
We’re ‘bullish above this level’ and otherwise bearish beneath it.
Oct 14, 2014: 10:06 AM CST
After failing at two key support levels very recently, the S&P 500 and broader US Equity Markets have one more major support test and potential bounce as another downside target is fully achieved.
Let’s see the support target and note the positive divergences developing into this level:
We’ll quickly note that the 1,925 price confluence (rectangle) then the recent confluence of the rising 200 day SMA with the 1,900 “Round Number” level also failed to stop the bearish action.
When support levels fail, it often sets up great trading opportunities to play short (bearishly) into a fast-moving market, as has been the case recently. Continue Reading…
Oct 13, 2014: 12:26 PM CST
At the halfway point today, we’re balancing the odds of another bullish reversal off support against the possibility of a continuation of the persistent selling pressure we’ve seen lately.
We’ll start with our chart of the S&P 500 for clues:
For additional commentary, see this morning’s update on “Planning Another Possible Intraday Reversal from Positive Divergences.”
The main idea is that we may see another repeat performance of what we saw October 8th when price touched a new low against “triple” positive market internal divergences.
There’s no guarantee price will once again rally higher but do focus on this potential bullish outcome.
The market would be an outright, aggressive short-sale under 1,900 again.
Oct 13, 2014: 11:59 AM CST
Let’s take a moment to view a “Big Three” Market Internal Chart of the S&P 500 to note yet another positive divergence and possible “intraday reversal” outcome.
Here’s the current picture and price pathway:
First, take a look at my intraday update post (just like this one) from October 8th which showed a near-identical pattern.
Mid-day October 8th, all three Market Internals showed a clear positive divergence (the indicators were making higher lows at the same time price traded to a lower low) and the forecast indicated a likely intraday reversal.
That was indeed the correct call as the market reversed higher off the 1,935 level to rise roughly 45 points higher into a negative divergence at the 1,970 target level.
Quite simply, we’re seeing a similar positive divergence – compare the yellow highlights – to October 8th. Continue Reading…