The bears landed a major score today. The fat lady has not sung yet but today’s EOD drop occurred against a long list of bullish tail wind (I covered in exhausting detail all week) and was big win for the grizzlies. We closed at a pretty respectable NYSE D/A ratio of 3.63 (i.e A/D of 0.275). Not a bad day but we are no at first base just yet – for that we need the next support zone to be taken out – here is your updated road map for tomorrow:
I think the chart is pretty clear and I have highlighted all important inflection points for you. Again, I cannot under emphasize the meaning of this final candle down in the face of an overwhelming list of bullish charts. But my disclaimer (or CYA remark if you will) all last week has been that slides happen in oversold conditions. Maybe the Goldman boyz turned their trading bots upside down – who knows.
However, the bears are not out of the woods yet. Without a breach of 1040.78 Soylent Green remains a slightly diminished but real possibility. So, if you’re harboring puts or short positions (soon to be illegal if you leave it up to Bernanke) don’t get too comfortable yet – we’ve seen many overnight surprises in the past week and I doubt it’ll be as easy as straight down from here. But the odds have increased by at least 20% today.
One of the most fascinating charts today was my EUR/JPY correlation to the SPX. As you can see, the FX pair actually held up quite nicely. The question now in my mind is whether or not today was only a bear trap or if upside in the EUR/JPY has now a weakened impact on equities. If the latter we are most likely looking at SPX 970 – if the former, well then we should know pretty soon as Soylent Green has not much downside to play with.
As a matter of fact, the onus is now on the bulls to breach that center line inside Mr. VIX’ Bollinger bubble. If they do sweet reward await near the 23 – 24 mark (depending how fast they make a move). If they let the bears manhandle them like today we could see 40 readings and higher in a jiffy.
Alright – see you tomorrow – same rat cave – same rat time 🙂