Waiting IS the hardest part!!

As annoying as it is, we cannot draw any more definite conclusions from todays action. While the $INDU and $SPX chugged lower all day, the $COMPQ was busy testing its highs again. I mentioned a few days back about the non-confirmation between the $COMPQ and $INDU/$SPX, indicating that these markets should be in their last legs. This is an updated version of Friday’s non-confirmation chart. Notice that the split has widened.

That said, the $COMPQ, and particularly the $RUT, have some issues that need to be addressed. While the $COMPQ is leading the blue-chips, the small caps are busy painting their own picture. The larger $RUA has continued its stagnation along with the blue-chips, adding yet another laggard index to the bunch. However, the $RUT is outpacing the $COMPQ by more than 20% and the $RUA by 40%, by managing to retrace around 95% of its first wave decline,. While perfectly acceptable, this means that it is really “do or die” time in the $RUT. A retracement of 100% is the maximum allowable, so it really needs to head lower from here. If it breaks 763.27, the 6/5 highs, we would have to offer up different scenarios. Another interesting clue is the action around the bollinger bands. Indexes seldom push far outside of the 2.0 Bollinger band, however almost every market reversal is accompanied by a spike of that level. The $INDU and the $SPX have spiked the 2.0, The $RUT has closed outside and re-entered, a likely sign of a reversal, while the $COMPQ has closed outside of its 2.0 BB for 4 out of the 5 days. This is some serious strength, but also means that the potential energy in the impending reversal should be remarkable. This is $RUT…

And here’s the $COMPQ…

And here’s a $COPMQ/$RUT comparison just for kicks!!

We have price retracement, we have time proportions, and we have a completed EW pattern. We have fractured markets, we have lagging breadth, and we’ve got the small caps leading the advance. We’ve noticed a minor turn up in the Call/Put ratio, as well as in the $VIX, and will be watching both for further signals. All this is painting up a fantastic market decline. All we can do is wait and watch…

At this point I must keep the near term trend indicator at mixed, while I feel that may quickly change, I cannot confirm the decline is in force among all indexes. That said, lets hope this expiry is exciting..

Some Duuuuuude asked for some thoughs about what sectors we thought would lead the markets lower. I have an article almost finished discussing some of these sectors. I have another article I am working on dealing with some of the trades we have taken recently, as well as some longer term ideas. Keep checking in as I would expect to have these both posted in the next couple of days.

Skol!