Friday, August 13, 2010

Yesterday's Market

First, notice that the lows from Wednesday provided a "zone of resistance" for any upward movement in yesterday's market.

Yesterday, there were five moves through the EMAs, none of which gained any serious momentum beyond the EMAs. That tells you the market is very bearish right now.

Note particularly the last rally which printed some very strong bars on rising volume. If any rally was going to get some steam to move higher, it was this one. But there was no move higher, meaning the bears were in control.

Prices are now in the "Fib zone" - the area between the 38.2% and 61.8% Fibonacci retracement where prices typically run into some resistance.

The technical chart tells us that prices have broken an uptrend (a) and are now below all the EMAs (b). However, a lot of money flowed into the market over the last rally (c and d). The question now is will that money start to leave or will we simply see a little profit taking with money remaining in the market? The best way to tell that is is we start to see some very strong bars printed -- bars with long bodies. Also note the MACD has given a sell signal (e), meaning that at best, we're moving into a period of consolidation.

Note the same analysis as the SPYs applies to the QQQQs.

The IWMs are technically a bit weaker because they didn't see as large an influx of money (the A/D and CMF lines).