3 down days in a row have deteriorated breadth and momentum indicators. Yesterday I mentioned that technical indicators were rolling down, today, in addition to the Stochastic bearish cross, issued on Tuesday, we have a new sell signal triggered by the NYSE BPI
The McClellan oscillator has worsened further as it is now approaching the 60 line. When it dips below the 60 line, it is considered that the market is oversold and it is susceptible to establish a tradable bottom.
The NYSE 10 dsma Adv-Dec Volume steep fall is suggesting distribution, and may induce the equity market into a larger correction if in the next trading sessions it dips below the zero line.
Yesterday I mentioned that it is not clear yet that price has established an intermediate top by completing the impulsive up leg off the November 25 low.
Instead of running ahead of the price action I prefer to adopt a conservative approach.
We know that once the fiver is completed price should take a multi-week breather. We also know that when/if the correction takes place the 200 dsma = 1263 will dictate the fate of the intermediate trend.
With the price information available at yesterday's eod print I will not jump in the "camp of calling" a major reversal, instead I believe that price is involved in at least a short-term reversal and odds favours more down side for the next few days. In other words it is possible that the EWP structure of the current pullback is not completed yet.
We also have the critical support at 1376 that will cause the end of the November 's up leg or the achievement of higher highs depending upon if price holds above it, or breaks below it.
If the short term EWP that SPX is unfolding is a Double Zig Zag then odds of a test at 1376 are large.
I will monitor SPY since we have a well-defined boundary. If my short-term scenario is correct price should not close yesterday's gap down at 140.21, while if the March 6 up leg has more business to the upside price should not breach the 138 horizontal support.
For the immediate time frame yesterday's Doji suggests that price will attempt a rebound today.
With 6 trading days left before month end my guess is that by the end of next week we should expect a rally. If the "always end of month" bullish bias does not occur then we will have a serious warning that something more bearish could be in the cards.
For the short-term time frame another factor that suggests more down side is due to the EWP structure of NDX since it is reasonable to expect at least 2 down legs.
AAPL, once again will hold the key depending upon it unfolds 2 down legs with a projected target in the area of 588 or if it breaks to the upside a bullish double bottom that should carry price to a new high.
Have a great weekend.
