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Selling Done? Or Just The Beginning?

9/26/2014 7:15:19 AM

Good morning Traders,

Well, a widely publicized breakdown in the internals has resulted in prices catching up very quickly. Thursday's action was the proverbial picking up a dime in front of a steam roller as 1 down day took out the past 1-1/2 months of gains. Is it done?

Well, in the very short term, I would expect a bounce attempt at some point today even with the futures pointing lower. So we'll see weakness into the morning pivots and watch for a potential bounce. But it should be short lived. Here's some evidence.

5-Day New Highs Minus New Lows Chart

based on the above, we could be on a program sell, where next week we'll see if the weekly sell programs kick in and take the market even deeper. Again, I'd prefer to see this type of action develop slowly, but the market doesn't care what I prefer. All I mean is that I like trading slower to develop tops, not action like this where everyone sells as evidenced by the Trin on the NYSE.

Cumulative Equity Money Flows Chart

Above is the cumulative money flow data ex-etfs. The signal is bearish and potentially longer term. The data including ETFs is still bullish - but that could be terminal as well as there's been a lot of talk about the market being pushed up falsely by all the money moving into ETFs - which is usually a sign of a top.

35/105 Trading Days Cycle 2013-2015 Chart

Looking at our trading cycles, the 35/105 day is pointing towards a move lower into 11/12.

10/20/40 Week Cycles and Seasonality 2014 Chart

And with our cycles chart coming in, we could be seeing that 20 week cycle low coming in. So the bull may not be over yet and this may just be the pause that refreshes. That doesn't matter in our trading system because we position for every move and ride it as long as we can. Sure, that will result in periods of small losses when you get choppy markets. But we're playing for the mid term moves. And there are usually several during the course of a trading year. Though in long term bull markets, that trading style is more hedge like as sell offs are short term in nature. Eventually a bull market turns into a neutral market or a bearish market, where our system will outperform.



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