Tuesday, June 29, 2010

End of the Bull Market?

says Fibozachi.com.

Good analysis. Particularly after today's rout.

Did you know that there was only one stock in S&P 500 Index ended in green today? Zero in Dow Jones Industrial Average, and only 1 in Nasdaq 100?

Did you know that such an extreme number on S&P last happened in September 29, 2008, right before the cascading market crash in October 2008?

End of the Bull: Primary Trend Shifts as Markets Shatter
(6/29/2010 via Zero Hedge)

"While technical analysts and traders have numerous techniques for determining trends, the most basic method is the tracking of higher highs and higher lows (bullish trends), or lower highs and lower lows (bearish trends). Tuesday's relentless sell-off across US equity markets marked an undeniable end to the continuous series of higher lows that had been intact since July 2009. With Tuesday's close below 1,044.50 on the S&P 500 Cash, 'bulltards' can no longer claim that the primary trend of equities remains bullish.

"Traders are going to have their work cut out for them in the days and weeks ahead as a plethora of support levels remain scattered between the levels of 950 - 1,030. Though equities appear poised for downside acceleration into Q3, remaining short may prove difficult in days ahead for most as increased volatility, erratic HFT algos and near-record market internal readings combine to create yo-yo-like equity markets. Tuesday's Advance / Decline line for the S&P 500 clocked in at -498, with only Zimmer Holdings (ZMH) closing higher. As a company that designs, develops, manufactures and markets orthopaedic reconstructive implants, dental implants, spinal implants, trauma products and related surgical products ... could GETCO be anticipating a large order from Mr. Market for a new hip?

"Joking aside, what can we expect after such an all-encompassing technical rout? There are essentially two ways to interpret such overwhelmingly positive / negative market internal readings: temporary exhaustion and inflection or breakaway continuation. Normally, when US equity markets exhibit an opening dislocation (greater than +/- 1.5%) and an extreme trend day (greater than 90% A/D, VOLD, etc.) there tends to be an immediate reflex so as to offset lopsided internal measures of momentum. And though the majority of such dislocationary instances immediately resolve themselves in the opposite price direction, the possibility of witnessing a breakaway continuation to the downside here looms large. [Emphasis is mine.]

"The only other modern instance of a -498 Advance / Decline reading on the S&P 500 occurred on September 29, 2008."

The article continues, and it has several charts (including the one I linked above) that illustrate this was no ordinary down day.

Their recommendation for traders? Sit on your hands for a day or two, to see if any set up presents itself.

This gotta bounce tomorrow, at least some, and the stock futures are in green right now (Dow futures up 31 points, S&P futures up 3.70 points).

Since all that matters seems to be Fibonacci retracement numbers, here are numbers to watch if the market does bounce tomorrow:

38.2%: 9,935
50%: 9,973
61.8%: 10,011

38.2%: 1,048
50%: 1,053
61.8%: 1,057

Just keep in mind what Fibozachi.com says above, that it may be a "breakaway continuation" to the downside. That means without hardly any dead-cat bounce.

Batten down the hatches, I'd say.

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