With today's steep reversal on high volume (see ES chart above), I'm now watching the levels from the prior intermediate-term bottom on 8/17 and 8/19. A drop below those levels would suggest that an important bull top may have been registered in August. As it stands now, however, I'm treating this as a wide trading range defined by those August lows and the recent price highs.
One data point worth noting is that we're already seeing more stocks making 20- and 65-day lows than we saw at those August lows. That tells me that, although the market averages are above their previous low points, we're starting to see individual stocks breaking down. Of the sector groups, the raw materials stocks (XLB) are closest to those August lows, reflecting continued weakness among commodities.
Very solid buying came in when we traded below ES 1000 in mid August, launching stocks to new highs. Now, however, we're seeing very solid selling off the recent highs. Inability to find buyers below ES 1000 would suggest a major shift of sentiment among money managers. Conversely, should we see selling dry up at price levels above those August lows, we could see a nice run higher back into that wide trading range. As always, I'll be updating indicators via Twitter (follow here).
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I'm just about at the end of my EOD review and a few things;
1) Yen continues to remain elevated
2) Treasuries remain strong
3) USD strengthening
4) Commodities weaken, but there are pockets of strength in the "softies"
5) Weird day, in that both gaps; 1019-1027 and 1007-1014 were filled
Most important of all, and I admit this is hindsight analysis cos I did not realize it during market hours, is Gold.... this is the first time in what seems like a LONG time that equities/commodities decline and Gold strengthens... perhaps further indication of a "safe haven" rather than the "reflationary theme" for the past few months.
(I was still in the reflationary mindset for Gold)
From an intermarket perspective, when the Yen, Treasuries, USD, Gold all get bid higher in the face of overwhelming global equity weakness in one day, it is suggesting to me that this could mark a change in investor/trader risk appetite, but requires further observation.
(Better late than never!)
Besides, we haven't seen a strong downwards trend day in US trading for quite sometime too... by my records in US trading hours, not since 7th July!
My fav 4 generals (XLE/F NQ TF) have been weakening for quite sometime, except the XLF... today, that got beaten senseless towards the end of the session, which capped any rally attempt; that bad boy has to be watched closely...
(Not sure if this means you can't lose by getting long gold though)
In any case, I think the sellers have sent a message today.
One more thing; sorry Doc, for ranting on your blog... that was completely "uncourteous".
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