Another Leg Down?
For all of the talk about how 'deeply oversold' this market is, the bulls still can not seem to get out of their own way. For a tradeable rally to unfold, this market needs more than the tepid, low volume advances that we have been seeing. Bear market rallies are typically strong moves that actually get traders wondering if 'THE' bottom has been put in. Of course every solid push higher that we have experienced over the last 14 months has been met with selling that causes the market to cascade lower.
Just last week I stated the case for a larger degreee wave 4 rally to unfold. That scenario can still take hold as long as the November 21 low is not violated. Why the cause for concern so soon after posting the wave count and probable behavior? Momentum indicators are not breaking through resistance and the price action remains in its downward channel.
Notice on the daily chart that the Nasdaq Momentum Oscillator in the middle pane (in blue) is back up at its overbought condition while prices have barely budged. That is once again a sign of a very weak market. Also notice how the price action can not even break up through the downsloping 20 day moving average. Again - a hallmark of a weak market.
If a new wave down is beginning, where will it go? Likely downside targets are 1147 - 1230 on the Nasdaq and 6700 - 7075 on the Dow. This market has not been healthy for some time and recent activity has done little to alter that impression. If the November 21 low holds and we see solid volume to back up a rally, then we will go higher, likely for the remainder of December. If this market rolls over one more time, look out below.
Just last week I stated the case for a larger degreee wave 4 rally to unfold. That scenario can still take hold as long as the November 21 low is not violated. Why the cause for concern so soon after posting the wave count and probable behavior? Momentum indicators are not breaking through resistance and the price action remains in its downward channel.
Notice on the daily chart that the Nasdaq Momentum Oscillator in the middle pane (in blue) is back up at its overbought condition while prices have barely budged. That is once again a sign of a very weak market. Also notice how the price action can not even break up through the downsloping 20 day moving average. Again - a hallmark of a weak market.
If a new wave down is beginning, where will it go? Likely downside targets are 1147 - 1230 on the Nasdaq and 6700 - 7075 on the Dow. This market has not been healthy for some time and recent activity has done little to alter that impression. If the November 21 low holds and we see solid volume to back up a rally, then we will go higher, likely for the remainder of December. If this market rolls over one more time, look out below.
"Also notice how the price action can not even break up through the downsloping 20 dma."
And when it did at the turn of Oct into Nov there was no accleration upon crossing & it turned into a vicious bull trap.
Btw, have become a big fan. Enjoy your blog very much; you do great work. We think very much alike. I like the detailed, comprehensive, nuanced manner in which you describe what i'm also seeing. However, you also add to & bring my thoughts into focus. I especially like that you don't have the hype & ego that many blogs have.
On the one hand, wish you posted more often; on the other hand you only post when you have something substanial to say (not mere blather). Furthermore, you're neither a permabear nor a permabull.
I'm an ex-registered rep with a major wirehouse. After that, in a different decade, i was a floortrader & member of a commodites exchange.
Thank you & regards,
dave
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Thank you Dave. Your feedback is much appreciated. I learned a long time ago that the market is always right and we as traders can not impose our will on it. That is where perma bulls or bears lose credibility. The market is ever changing and always tests the limits of both conventional wisdom and trader/investor patience. I hope that this blog can help others navigate this very difficult environment.
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