Last night we said we should close under 1250. Got it. The 1235.42 unfilled
target from SEP 5 printed.
This morning we said the most likely
scenario would be to drop under 1258.57 (yes), recover to at least 1265.29
(no) and drop (probably big) later in the day (yes).
Mebob and mejt
say today's decline is not sustainable. We have new targets of 1265.29 and
1252.94.
The chart of the McClellan summation index http://stockcharts.com/charts/indices/McSumNYSE.html
shows that in JUL we hit levels seen only at major market lows. It also shows
that since then the NYSE composite has been dropping to new lows while the
summation index has been going inexorably higher. Even today's slaughter did
not dent its path. This divergence is pounding the table in telling us this
retest of the lows will hold and that higher prices are coming.
Fig.sep9a, a 30 min chart, uses the blue grid to demonstrate that the
early morning consolidation should include the 50% point of the decline; so
today's low came close to the maximum possible. The last bar crossed the TDST
line. Penetration is allowed, but it must be immediately rejected. Throw in
the Hobson close and the rally in futures and tomorrow is strongly favored to
gap up. (That is good for me since I went long near the close.) It would not
surprise me to see the TDST line tested again; any violation of it (meaning
under 1227.04) is a buy.
Fig.sep9b is a daily chart. Friday we printed
a bar completely under the lower band; Monday we had a bar completely over it.
That is a buy signal as long as Friday's low holds. A challenge of the upper
band, now at 1313, is called for. If the wave b low is in and wave c equals
wave a in length, the target is 1329.94.
A close under 1234.38
triggers a daily sequential buy signal. Other sequential signals in different
time frames are within a few bars of printing, adding to the validity of the
signal.
VXO (the original VIX) is at its highest level since the JUL
bottom (bullish). Bob Carver of our Time and Cycles group has pointed out that
in both number and dollar value of contracts traded put buying is at a high
extreme (bullish).
Finally, I have rarely seen so many fine
technicians be so convinced that lower prices lie ahead. Don't count me among
them. I have this area as a major low and believe it should be
bought.
Jeff