By the afternoon, we were obviously still heading south, but we closed at 1329 on the cash, so we are awfully close to my target zone here. We are also oversold on the stochs and MACD on a hourly chart. Oversold can get more oversold and more oversold, don't forget that, just as overbought can get more and more overbought.
I'm curious what will happen tomorrow, the futures are down. It's possible we hit the target area in the futures and never see it during trading hours, but just a feeling from experience, we might tank tomorrow and drop well below 1320. That is a dangerous area, if we do that and you've been short, I would take some profits and wait to see what plays out. We very well could see something like 1310 intra-day and then close back up above 1320 and inside the channel again. It's definitely a bear fake out zone here.
A close convincingly below 1320 on the cash could mean a lot more downside is on the way. We'll re-evaluate if that happens tomorrow. It would change some of the longer term EW counts.
The key here is we caught the majority of this down move, the bottom of the channel or below intra-day is a very logical place to take profits and see what happens.
Here is the chart I've had going for awhile, we are still following the path quite well;
Some other things from today. Consumer stocks took a whacking today. Take a look at AMZN, down almost 5%, HPQ is getting hit badly AH, Walmart reports tomorrow after close, we'll see what happens there. In the tech world, we have CSCO doing record layoffs, AAPL and GOOG were down 2% today.
From a leadership perspective, we are losing a lot of leadership here slowly. The SOX (Semiconductor Index) got hit for 1.4% today. The Russel 2000 is also taking a beating and was down 1.4% today as well.
All this does not mean we can't have another leg of the rally up, but it does mean that we continue to look more and more like we are within some type of topping process in the market. What used to feel like every dip will be bought is slowly but surely starting to feel a bit tenuous.
One other chart i'd like to share with you tonight. IYR, the tracking ETF for Dow Jones US Real Estate which is composed of a lot of REIT's or Real Estate Investment Trusts, appears to be in a multi-year rising wedge which is fast running out of time. From top to bottom of the wedge is now only 4$ in IYR, which is only about a 7% move. It is sitting in the middle of this small range right now. It will not take much of a market scare to break down out of this huge wedge. Commerical real estate will obviously suffer if consumers pull back spending and more spaces begin to empty again. Even worse for CRE is going to be if the FED does not continue it's treasury bond buying spree and if the deal reached on the debt ceiling does not bring any signifcant changes. Left on it's own, the treasury bond market is only going in one direction and it involves rates going much higher.
IYR;
GL tomorrow.
And also don't be afraid to leave comments or questions. I'm not easily offended. ;)
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