The bearish volume action continued today with another higher volume selloff. The Nasdaq and S&P 500 were both down about 2.5% and are closing in on their August intraday lows. The Dow, following the Russell 2000′s lead, broke its August low today.
Given how poorly Intel was trading post-earnings tonight I think the August lows will be blown out tomorrow morning. That may not be an entirely bad thing for the bulls though. As I said last week, I’d rather see the market bottom by taking out the previous low and then rebounding. That way, we’re more likely to wash out the suckers and maybe get some capitulation. My gut tells me that we’re still a few days away from any real capitulation though. T2108 is still above 20 (28.52 to be exact) and the indices are no longer short-term oversold. We still have some room to go before hitting the max pain point.
No changes
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Down | Down | Down |
| Intermediate | Down | Down | Down |
| Short-term | Down | Down | Down |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Hey Mike,
I dont understand why the bullish case wants some capitulation. Wouldnt you want the border line capitulator’s money in the market instead of selling? Or are you expecting that they capitulate then chase back into the market?
Thanks,
Eric
Eric,
Think of it as the opposite of a blow-off top. It’s just a case of flushing all the sellers out of the market. I doubt that the ‘natural’ sellers would rush back in after a capitulative selloff but you’d certainly get short covering as well as value buyers stepping in.