Not to sound like a broken record, but it got even uglier today. We had distribution days across the major indices, the Dow completed a head & shoulders top and is now negative for 2004, the S&P 500 gave up its 50-day moving average and the NASDAQ closed below the bottom of its trend channel. Now that things are clearly bad it’s probably time for a bounce. I’d like to see an early morning flush out of the bulls followed by a 2:30 rally back into positive territory. So I’m looking for a lot of hammers to be made tomorrow or Thursday.
My buddy the Vix spiked above its moving average for the first time since last March.
That, too, should signal an imminent reversal.
wow, that’s a hell of a 3 day move for the VIX.
The spikes were lots worse in the 2000-2003 meltdown, but we’re not in that environment by any stretch.
One thing I’ve noticed from looking at the 5-year charts is that the recent year’s rally has not gone ballistic like we saw in 98-’99; it’s been a gradual, orderly, wall-of-worry uptrend.
Possible interpretation is that the current turn simply reflects the big rally that came before it. We got ahead of ourselves w/the Santa Claus rally and that’s being corrected now.
Not to say the market couldn’t lose its mind at any minute and plunge into the crapper.
I read somewhere that in the bear markets of the ’60s and ’70s a lot of traders were content to play the channel game… shorting at the top of it and going long at the bottom.
Yeah the markets have been brutal lately but this shake out will present some good buying opportunities really soon.
Thursday: Well, if I emerge from this spanking at a profit I’ll definitely have tougher hide than I started out with.