Dark Friday

The bulls have but lost their opportunity to give the bears one final run for their money. The jig is not up just yet but we are getting pretty darn close. Time to look at some support levels, but first a quick look at the Dollar:

I told my subs that ole’ bucky might paint an extended fifth and it was kind enough to oblige. Remember when I suggested long positions after the completion of the wave four flat? We correlated our count with 2sweetie’s retracement levels and arrived at targets for the expected ramp up of 84.8, 85.2, and 85.8. As we pushed into 84.8 I told everyone to take partial profits and to hold out for a little push higher. And again ole’ bucky was happy to oblige our bullish inclinations as we now have arrived at the 86 mark. So, what’s next for the Dollar? Well, I will post a retracement level update later today.

Now let’s take a look at where equities are heading:

Things are quickly falling into focus here. Forget about the count for a second – just look at the ‘form’ as they say. Compare it with the tape of the past two months and what do you see? I tell you what I see: A relentless march to the top followed by an increase in volatility and distribution. Then followed by a rapid drop and even more volatility – followed by a violent snap back and now yet another horizontal drop.

What does that look like to you? The continuation of a bullish phase (i.e. bear market correction) or the beginning of a new phase in the markets? I personally can’t help but point toward the latter – and by doing that I am trying to not let personal biases or long term views affect my short to medium term perspective.

Which is why I only give Soylent Green only about 20% probability at this point. We would have to see an immediate snap back a veritable buying frenzy – either today or tomorrow. Besides price underlying market measures are also extremely bearish – quite a contrast from last Friday:

This again is my NYSE ratio chart – but on steroids. First, let’s take a look at the lower panel, which is the original A/D ratio: Current readings are 0.07 – which is extremely bearish and this is not what we should see if this were a repeat of the early March 2009 scenario.

Now what really continued to bug me was that the A/D ratio has a similar problem as the original TRIN – it’s extremely hard to interpret on the bearish side as the bearish range goes from 0 – 0.99 while the bullish range can go from 1.0 – 20 or higher. So, I decided to fix it once and for all. Which is what you see in the panel above – it’s a new monstrosity I call ‘superAD’ and it’s mathematically normalized. As you can see, now the bearish and bullish readings are better weighted and much easier to put into context. Hopefully this will also aid us in identifying various fractal formations as the form itself is not changed – just elongated on the bottom. There is also a zero mark now and as you can guess zero means neutral – positive means bullish and negative means bearish.

Well, just look at today’s reading – normalized it almost looks as bearish as last Thursday. Now isn’t that some valuable information? I give and I give and I give… 😉

1:38pm EDT: I just looked at my TNX/SPX correlation chart:

So far I don’t see a bullish divergence – so far so good for the beartards.

1:53pm EDT: Our EURUSD/ES correlation chart looks in complete sync today:

I call that a lock step formation. Yeah, yeah – hold the German jokes. Well, if you ware waiting for a bounce in equities (quite a number of rats it seems – didn’t load up at the top as I told ya, mmmh? ;-)) then look no further than the EURUSD pair or the 6E futures.

Cheers,

Mole