Oct 16, 2014: 1:15 PM CST
We’re putting the pieces back together from a broken market yesterday!
An afternoon violent “V-Spike” Reversal took us right back to where we opened, and today’s session took us just above that level where we are at mid-day.
Here’s our S&P 500 update and trending stock scan for the day:
After a market collapse (vacuum of buy orders) swept shares yesterday morning, we’re retracing back to where we ended the day Monday afternoon near the all-important 1,875 pivot level.
We’ll use this as our focal level and trade bullishly for an intraday reversal above but bearishly (to continue the trend into resistance) under 1,870.
Oct 15, 2014: 2:38 PM CST
How does current market volatility – which is surging – compare to the two prior post-stimulus (QE) sell-offs that occurred since the 2009 Bear Market Bottom?
Let’s take a look at where we are and what may be in store if history is a guide:
The chart above shows the S&P 500 index compared with Volatility.
I’m defining “Volatility” as the Intraday Range which is measured by the intraday High minus the Low.
The red histogram shows each day’s range (high minus low).
The black line is simply the 21 day (roughly one month) average of the Intraday Range. Continue Reading…
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…