The chart below is an update of the chart that I made a few days ago in SPY Rally Structure. Make sure to study that first if you haven’t already. (click to enlarge):
So far, things are following the same pattern. Rising wedge “B” is breaking down just like rising wedge “A” (red lines). In fact, today’s selling was deeper and sharper than that of October 21st. It also had a bit more volume, and every volume bar on the 60-minute chart today was red. So, while the bulls dismissed today’s selling as simple profit-taking, I don’t think that is the case.
If the pattern continues to repeat, we should see a gap-down-and-die day on Thursday just like we did on October 22nd (red arrows). And thanks to Cisco’s earnings report, we already have a nice gap down in the futures.
The ECB and Bank of England will probably cut interest rates tomorrow morning, but perhaps the Cisco news well trump them. After all, lower interest rates have yet to put even a small dent in the recession, and Cisco’s results are stone-cold bad news.
Great model, Matt. The news are pretty grim today; Asia down hard, dollar up, talk of GMAC going bankrupt, credit card companies not being able to raise money. The problems are too deep by now for lower interest rates to cure them, and we’re seeing a lot of evidence of that. We could fall hard today and tomorrow, breaking the (albeit brutal) sideways trading we’ve seen for the past few weeks.
If we’re not able to move above 1000 after a landslide election, that means the best money to be made is on the way down, brutally, after convincing a sufficient number of people that the bottom is in and the danger is gone. At the same time, several credible pundits (including Buffett, Roubini, and your Dallas Fed guy, Fisher) are saying we haven’t seen the bottom, so we’re not going to have much of a rally until we’ve crushed down lower.
Let’s see the next couple of days if we can break last week’s low. The election was the perfect short squeeze and distribution bounce.
Japan is slavishly following the US markets — amazing fidelity. Europe is more varied, and could have an influence, but the news there are dismal too.
Warren Buffett is a possible candidate to become U.S. president-elect Barack Obama’s new treasury secretary. (CBC)
The problem for the Bulls is that there are just too many days. Too many days in a month, in a quarter, in a year or in a lifetime. Just too many days.
[...] skyrocketing at $94.55, and I made a 16.3% return. I made similar trades in the futures too. And the analysis that I used was posted right here for [...]