Rallies intact despite recent losses

After returning from my brief vacation markets enjoyed decent gains which - over the last 3 days - have given back some of the advances. However, markets remain well positioned to confirm a swing low (even if October lows are breached) and investors should be buying stocks, particularly on days where losses of over1% or more are registered. Remember, this is buying for 5 years+ down the road - don't fret the daily noise.

For pessimists, there is the Semiconductor Index and Copper prices.  Copper prices broke before Semiconductors as lower demand for the base metal ultimately reflected itself in lower demand for chips, which is hurting and will continue to hurt the Nasdaq and Nasdaq 100. Keep an eye on this chart for a bottom. The likelihood is that more losses are on the cards for both copper and semiconductors.

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Rallies Run Into Channel Resistance

The initial bounces off spike lows have encountered their first major test of supply with pushes into newly drawn channel resistance. All indices are mapping this price action.

First up is the S&P. Today's action finished with a spike high bang on channel resistance. Technicals are negative with the exception of relative performance, which has been tracking higher since September. Shorts may look to attack here and are likely expected to do so - if they don't emerge then we can think about Fibonacci retracements of the entire September-October move.

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Volatility Picks Up as Selling Volume Lightens

Intraday ranges were wide as indices struggled between building swing lows or selling off even more. By the close of today's business, indices were indicating lows are not in place and further declines are likely but these may be nothing more than spike lows (on yet another wide range day). Whatever happens, the investor `buy`signals are still in effect for the S&P and Russell 2000.

The S&P experienced a 4% range between highs and lows as the relative performance continued to swing back to Small Cap stocks (after an extended period of outperformance from September). Sellers look to be exhausting themselves as volume took a significant drop.

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Losses Look Bad But Long Term Investors Should Be Accumulating

Friday was ugly but could have been a whole lot worse. What was particularly worrying was that certain indices were unable to defend either Thursday's close or open and were left set up for another big push lower. However, by the close of business - while not pretty - these indices were certainly better than they could have otherwise been.  That's not to say indices can't or won't go lower, but if you are buying low and selling high we are in one of those buying low setups.

The best index for buyers is the Russell 2000. Friday's action tagged the 10% envelope from its 200-day MA and is an area where 90% of historic action for this index since 1987 has been better than it is now. Should the Russell 2000 tag 1,378 it will reach the 95% zone of historic action. Friday's finish also left it better than halfway inside Thursday's range with a bullish hammer to boot. Relative performance is poor but likely oversold.

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