excerpts from Jasons weekly Index report at leavittbrothers: Index Report, August 3, 2014 Last week may have been a game changer...it may have been the straw that broke the camels back. The market had been slowly deteriorating the last month. The quality and quantity of set ups declined. The breadth indicators turned down one after another. Sentiment shifted. The small caps were under-performing by a long shot. Breakouts werent getting follow through, and stocks were starting to break down. Good news led to small gains; bad news resulted in big losses. Very slowly, over the course of about four weeks, the market deteriorated, but it hung on pretty well. The Dow, S&P 500, Nasdaq and Nasdaq 100 were near all-time or multi-year highs just two weeks ago. Most things pointed towards lower prices...except the indexes mentioned above which somehow - perhaps magically - were holding up very well. Then last week came. For three days it was business as usual. The same warnings, the same reasons to not believe another leg up was possible, yet the market was holding up. Then we got a big smack down. News Argentina was going to miss a debt payment sent shock waves around the globe. Every single market in the Asia/Pacific region closed down. Every market in Europe was down at the time the US opened. The market then opened down by a wide margin and proceeded to sell-off most of the day. The losses suffered were not only among the biggest since the the April lows, they also caused several of the indexes to slice through support levels. From a technical standpoint, the uptrend was over. No longer could we consider the indexes to be resting within an uptrend. This isnt the first time the market has taken out key support. The same thing happened in April, but after one follow through day, the market bounced back. It also happened in January, but after a second leg down, the market recovered there too. Prior to that there were mini breakdowns in 2013 - each only lasted a week or two and none resulted in a big correction. This is where we stand now. Support has been broken, and the internals are now pointing down. Do we get a minor correction followed by a new high a month later, or will we actually get a 10% pullback - something that hasnt happened in a very long time? Well see. There are good arguements for both sides. As traders we make money trading the market, not arguing over what will come next. For now my bias is to the downside. When the indicators drop to extreme levels and hint at a likely oversold bounce, then well get a glimpse of the hidden buying interest. Does a bounce come with energy and enthusiasm, or does it lack any evidence the market is healthy? Time will tell. Market movement will tell.
Posted on: Sun, 03 Aug 2014 17:04:20 +0000
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