Yesterday I commented that the SPYS were forming a triangle consolidation pattern. Today they broke out of that pattern only to form another, 1-day consolidation and then break out lower after the pattern formed.
Notice on this chart the lack of any decent direction. In theory, markets are supposed to rally after a consolidation pattern. But here we have a break out followed by a correction. In short, there isn't a lot of bullish conviction here.
Yesterday I commented that the QQQQs were forming an upward sloping triangle. Today we see that the QQQQs were also in an upward 3 1/2 day trend which they convincingly broke on high volume.
The IWMs broke a 2 day rally on strong volume. Also note this average is whipsawing around with no firm idea where it wants to go.
Here's an exercise for everybody. Pull back and just look at the charts. What do you see? Garbage -- there isn't anything strong in one direction or the other. While you could make an argument for the QQQQs, the really heavy sell-off after the rally makes me question the bull's conviction. That volume sure looks like "let's get the hell out of here .... NOW".
The markets are meandering, moving from one event to the other without any longterm conviction in either direction. The Fed as frozen the bears for now, and the economy as a whole has frozen the bulls. It's an ugly Sargasso Sea in trading land right now.
2 comments:
You make a compelling case aboutt he direction of the markets. It is quite clear from your blog. It is ironic then that the news media, particularly the Pisani's, Maria's, Dylann's et al of CNBC cheer lead the markets even if they are up marginally. They have a spin on anything bad to make it look good!! Guess they need the ad revenue to pay hte bills, so why not get suckers in to believe it is time to buy!!
Bonddad, the beams coming through my tinfoil hat are telling me to ask these questions:
I haven't seen much analysis about the changes to the Dow 30 this week. (OK, I haven't been looking that hard.) But the masses who are less sophisticated than you are look at the Dow like it's the national financial blood pressure. Even down here, the Aussie market follows in lockstep with every jiggle of the Dow.
So what's up with these changes? I know the official rationale re: Honeywell and the cancer-obesity peddler. But is this actually being done to keep the all-important Dow number pumped up? With an unfolding collapse of the financials, I don't see how adding BofA will help that, though. On a broader perspective, how accurately do the companies used in the Dow reflect the status of the American economy?
And now on to the real tinfol hattery. Any thoughts on what impact Rupert Murdoch, the greatest evil to issue from this continent, has on the Dow? He's early in his reign, so perhaps there's no meddling. You think it could happen? And waaaay out in paranoia territory, who checks for the accuracy of the Dow? With the complicated system of divisors and tweaks they use to balance the newly chosen issues vs. the old, and for splits, etc., can the number be subtly faked to make it seem like the Dow is going continually up Up UP!?
Perspiring minds want to know...
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