I have been and remain a believer in the idea that what we have witnessed in the market since March is one of the best examples of a Bear Market Rally. Now it appears as if this rally may be headed for something different-lateral? Downtrend? I'm guessing downtrend. Most of the major indicies have broken below their 50 day moving averages on increasing volume, whereas this rally has been a rally marked by decreasing volume the entire time. Furthermore, important sectors are starting to show major cracks. Today's dominant price/volume relationship was Close Up with Volume Down-the most bearish of relationships, especially in a rally. This relationship has been seen quite frequently over the last week or so and in dominant form. For example, today of the NYSE stocks, the bearish dominance came in with close up and volume down 2201 stocks with the second most dominnt being close down with volume down at 1688. Last week we saw nearly a 2:1 dominance. The Dow 30 had 22 stocks closing up on lower volume, the NASDAQ 100 had 55 (of 4 possible relationships) and the S&P-500 had 273-more than half the stocks in the index.
However, that does not preclude a bounce attempt and what beeter place to do it than where most indicies are right now-just below the 50 day moving average. The intraday 3C charts show a clear positive divergence suggesting a short term bounce attempt, while the more influential daily charts show a very negative divergence.
I also included a chart of the $USD index which is showing a bullish falling wedge that looks to have broken out or be close to it, which is surprising to me. I'm neutral on gold and oil and other related commodities until I see how this will play out.
For frequent reders of this site, we have launched out proving period for what we hope will be some sort of pooled investment vehicle in the near future, whether it be a Hedge fund or some derivative of that. If you have any questions or comments please feel free to email me.
For now, we are positioning our account net short throughout several sectors and the market overall.
If you'd like to create and test your own trading system, consider taking a look at Worden's Stockfinder by clicking on this link or the platform I use intraday-which all of the charts you see came from-TeleChart (click on the link). If you are interested in my 3C indicator that you see on the charts below, click on the link, take a look at the platforms and email and I'll be glad to share my indicators and formulas with you.
Also don't forget to check out the free video training seminars by today's top traders-get 4 FREE videos from INO TV by clicking on this link. As always, feel free to leave your comments or email me.
