Thursday, November 01, 2007

Market Report

Newsletter, Members Click Here. To Subscribe - click Bull icon. I am still a head full of mucus but the last two days have been too hectic to not comment. Bulls are in trouble. Not only have Tech [NASDAQ and NASDAQ 100] breakouts reversed, but have done so on heavier volume - leaving large bull traps in the wake of the Fed decision. Both of these indices generated whipsaw signals in their MACD trigger lines - another mechanism which will have trapped bulls on the (former) Fed breakout. The warning signs were clear in the underperforming semiconductor index, and it was somewhat ironic to see this index relatively unscathed by the broad sell off. What is of greater concern for bulls is the action in the large caps [Dow and S&P]. Both left large bearish (and somewhat complicated) "falling three method" continuation patterns. The Dow cleaved through its 50-day MA and it's almost a turkey shoot to reach its 200-day MA. Adding insult to injury, nearly every heavy volume day since the start of October has been a distribution day and today was of no exception, not the kind of form which key breakouts are made of. The S&P at least was able to finish on its 50-day MA, but there isn't room for lots of optimism.

Small caps (Russell 2000) have struggled to join in market strength and were hit hard by the selling. What ever strength lingered from the August rally has gone. Add in a break of the 50-day and 200-day MAs, and the worrying failure of August's 'Death Cross' to reverse sets up a whole lot of trouble ahead.

Nasdaq market internals [$NASI, $NAA50R and $BPCOMPQ] haven't updated for today, but I suspect the 'buy' trigger in the $NAA50R will be no more after today. Difficult times as these internals lurk in a no-mans land of neither overbought nor oversold.