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Strange Sell Off Today…

By Red, on February 23rd, 2010

The market sold off today on a worst then expected consumer confidence number.  Duh!  I could have told you that!  Well, I guess they have to have something to blame the sell off on.  It’s not like they are going to go on TV and say how extremely overbought the market is, and that’s why it fell.  Of course all traders knew we were due for a pullback, and the news is just the reason to make it happen.

Looking at the chart below you see that we broke out the rising wedge yesterday, and fell down to the lower trend line on the rising channel today.  This did put the 60 minute chart in an oversold position, which means we should trade sideways to slightly up tomorrow, before starting a nice move down on Thursday or Friday, as I mentioned on my weekend post.

The-Chart-Pattern-Trader-spy-60-minute

One thing that makes me think that we will pause tomorrow, before heading down more on Thursday or Friday, is the light volume of only 207 million shares, that traded on the SPY today.  All of the other large down days were 300 million plus.  That tells me that the big institutions weren’t selling too heavy today.   It was still a nice sell off though.

And, this is clearly a signal of what’s coming soon, as I think the market was really surprised by the consumer confidence number today.  Otherwise, they would have backed the market down a little slower, and in a more controlled fashion.  If that 109.80 level broke, the market would have really started falling.  Notice how they rallied it up to close right above that master support level.  They made it by one penny, at 109.81 on the spy.

Let’s see if they can keep it a float again tomorrow.  I can’t answer that of course, but if I had to guess… I’d say they would, at least for Wednesday and maybe Thursday too?  As for Friday, I think we will start the next leg down by then… which will continue into next week.  Remember, they are trying to close this month out positive, and Friday is the last day of the month.

So, after the month of February is done, March is free to sell off.  Now whether on not that is P3… who knows?  I’d just be happy for a nice big sell off at this point.  I can’t see that far into the future, as my crystal ball is too cloudy right now.  Must be all that snow still stirring around from earlier this month?

Red

P.S.  One more thing… let’s not forget that fake print last week at 107.38, should we start selling again tomorrow, as that would be a likely target for a bounce.

Still In Rising Channel...

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Leo's Den
  • Kmoney

    No man's land here.

    If they can only push it to 1104ish tomorrow and the volume is VERY light then I think we head down soon.
    Anything moving up to 1115 and I think we might rip higher.

    • http://www.reddragonleo.com Red Dragon Leo

      As long as we don't rest the high, I think we will sell off next week. But for now, you're right… no man's land.

  • Earl of

    From Carl just now:

    March S&P E-mini Futures: Today's day session range estimate is 1092-1105. The market will reach 1200 over the next three months.

    estimate for today: 1092-1105
    estimate for yesterday: 1100-1112
    currently: 1097
    low last night: 1092.50

  • sundancer390

    10:09 est

    spy 60 min
    http://www.flickr.com/photos/47091634@N04/43843…

    for those looking for a big reversal in march, the action this week so far isn't indicating that

    SPX 3 min gaps from past two days
    1109.52
    1107.03

    • http://www.reddragonleo.com Red Dragon Leo

      I really don't know what to think at this point? The sell off yesterday didn't have any real volume behind it. That means the institutions aren't selling yet. Why? Are they waiting for a higher price?

      • sundancer390

        it's a mess like the chart shows, the TA enthusiasts will see a H&S but we already know the market is going higher because of the 1127.38 gap.

        today through friday will give us some clues about the long term timing, for a multi-month reversal we need a close above 1115.10 on friday. Now to pinpoint the week it starts we'll need a weekly close above 1144.98.

        A close above 1144.98 this week seems highly unlikely, so then we wait for the close next friday.

        • bensjoyce

          so you think the S&P will go higher toward 1127.38 BEFORE 1087-1090 area is breeched to the downside?

          • sundancer390

            yes, because of setups on larger time frames

      • SC

        May be b/c they are not looking for Pee 3? lol

        • http://www.reddragonleo.com Red Dragon Leo

          That makes more sense at this point, as long as that lower channel line holds.

  • sundancer390

    ***IF***

    if we get a monthly close above $SPX 1115.10, a setup will be in place for a multi-month reversal.

    Since 1990 there has been 4 occurrences of this setup on the monthly, 3 have been successful and 1 has failed.

    Dates of prior monthly setups:
    10/2007: success; major top
    08/2000: success; major top
    06/1999: success; 3 month reversal
    04/1997: failed; monthly close @ 801 propelled market higher to 1190 before a major reaction

    • Diablos

      Hi, Can you expand on the 'setup'? I see 1115.10 is dec closing, but don't know what pattern i'm looking for.

      Thanks from a newbie.

      • sundancer390

        the setup is a little complex as it involves some stats, it's not a defined visual pattern, the trigger for this setup is the highest period (in the case: monthly) close which is why the 1115.10 number is so important.

    • bensjoyce

      I'm not sure what you mean by a multi month reversal.

      a monthly close (by this friday) above 1115.10 $SPX means the S&P goes up to new highs (above 1150) or reverses down and breaks 1045?

  • Earl of

    Carl went long one unit /ES at 1095.50

  • sundancer390
    • gcocks83

      Thaks, looks like you are looking for us to touch the blue line. At what level would that be for vix? Around 16?

      • sundancer390

        yesterday's reaction on the $VIX gave it some room to move on the downside, today the blue line is in the low 19's, it'll be in the 18's by friday

  • bear/bull

    Red ya ready? We are heading down from here Target 105

    • http://www.reddragonleo.com Red Dragon Leo

      What makes you think we are heading down to 105? There's a whole lot of support that you must break through before you get to 105.

      That's not going to happen yet, (even though I'd like to see it happen). The ADX is losing a lot of steam as it's just barely above 20 right now. Once it bottoms and rolls back up, then we can talk about heading south.

      But right now… the bears are sleeping, and the bulls are grazing.

      • bear/bull

        It could go to 105 but most definitely 106 in the coming 2-3 weeks. IMO we will see.

        • http://www.reddragonleo.com Red Dragon Leo

          Yes, in the next 2-3 weeks we could go down to the double bottom at 1044.50 spx. That I agree with you on. I just thought you were talking about falling down in the next 2-3 days. Sorry, I mis-understood you.

  • Earl of

    Carl at days end:

    Estimated /ES range: 1092-1105 (13 point range)
    Actual /ES range: 1092.50-1105.50 (13 point range)

    Nailed the high, low and the range

    Carl's trading:
    Carl went long one unit /ES at 1095.50
    Carl added one unit /ES at 1101.50
    It appears Carl did not sell anything today.

    Grade A on range estimates, I (incomplete) on trading.

    • http://dreadwinaard.livejournal.com/profile dreadwin

      He only holds positions overnight when he is *very* confident.

      • Earl of

        That makes sense then.

        He did seem to like the market recovery after the last two bits of bad news.

        Hard to fault his thinking.

        • http://dreadwinaard.livejournal.com/profile dreadwin

          I also think we have more upside left this week.

  • Earl of

    TZA closed down 2.5% today.

    We are in a New Moon Trade (favors TZA).
    [ After seven days, this trade is DOWN 10.0% ]

    Volume today for TZA was about average for the past 7 days.

    $RVX (VIX for $RUT) closed 4.1% lower.

    TZA was down today and down in 10 of the past 11 days.

    Ultimate Oscillator jumped from 30 to 34.5 while TZA fell, which is a divergence possibly warning that TZA might rise tomorrow.

    Bollinger Bands for $RVX (VIX for $RUT): the lower BB was touched last Friday, but has moved generally away (up) since then, seemingly indicating that $RVX will be rising (good for TZA).

    Bollinger Bands for $RUT: the upper band rose, moving farther away from $RUT, indicating that TNA will continue to fall (good for TZA).

    http://www.americanbulls.com had TZA this morning as an unconfirmed buy. As I read it, the TZA buy was not confirmed today (pretty much needed an up day today & didn't get it), and the buy signal may be confirmed (or not) tomorrow.

    Overall, it looks like TZA will rise tomorrow.

    • gcocks83

      Thanks for the recap. I did not place any trades today.

    • monicadern

      Thanks Earl of. Perhaps you should have a TZA/TNA blog! This is the first time you have said that you think TZA might be up so finally I can sleep tonight!

      • Earl of

        No idea how to manage a blog, and happy being here, so long as Red is ok with all this TNA/TZA stuff :)

        My looks have a horrible track record. Horrible. You probably need to stay up :)

        • monicadern

          You can't have a worse track record than me! Anyway, I'll be interested to see if the Bradley turn date on Monday has any significance. If it does, I would imagine we run up to 1115 by the end of this week before turning over. I'm staying short. Too many signs pointing south long term to me. Check out etf-corner tonight. Serge did a video about all the world markets. Most of them have already displayed clear tops and are on their way down. I think it's only a matter of time before the same happens here.

          • Earl of

            Sunday is a Full Moon. The moon trade switches to TNA.

            Full Moon + Bradley Turn date. No idea how that comes out.

            One day at a time :)

          • monicadern

            Not sure I give the full moon much credence. But you have been trading TNA/TZA much longer than I have so you probably have a better idea. What will we do when the government eliminates TNA/TZA? We will have no identity!

        • http://www.reddragonleo.com Red Dragon Leo

          I love having you here… chatting about TNA stuff (wink). Just keep it fairly clean… OK? LOL

          • Earl of

            I'll do my best :)

      • http://dreadwinaard.livejournal.com/profile dreadwin

        I would feel a lot more confident about TZA going up if the RSI on $RUT would have hit 70 recently. It hasn't done that (yet). We could still tag the lower BB on $RVX at 22ish before we're done with upside buying pressure.

  • Earl of

    Late data from http://www.americanbull.com (Late because I don't subscribe, and what's free is late)

    Roughly translated into something I can understand:

    Didn't get confirmation today (for a TZA buy). So, we look for the same confirmation tomorrow.

    Basically, we need a white TZA candle tomorrow. It's ok to buy TZA during the market day if it seems likely that the day will end with a white candle.

  • monicadern

    Red, Anna posted that she saw a fake print this afternoon at 109.79. Just an FYI.

    • http://www.reddragonleo.com Red Dragon Leo

      Yeah, I spoke with her about it. We'll probably tag that level tomorrow, as they are pretty accurate. Don't know if we will break it or not, as that's the lower trend line on the rising channel in the 60 minute chart I posted above.

      • monicadern

        interesting. Thank you! Maybe we will open there and move higher.

  • gcocks83

    Thanks for the recap. I did not place any trades today.

  • monicadern

    Thanks Earl of. Perhaps you should have a TZA/TNA blog! This is the first time you have said that you think TZA might be up so finally I can sleep tonight!

  • Earl of

    That makes sense then.

    He did seem to like the market recovery after the last two bits of bad news.

    Hard to fault his thinking.

  • Earl of

    No idea how to manage a blog, and happy being here, so long as Red is ok with all this TNA/TZA stuff :)

    My looks have a horrible track record. Horrible. You probably need to stay up :)

  • Earl of

    Late data from http://www.americanbull.com (Late because I don't subscribe, and what's free is late)

    Roughly translated into something I can understand:

    Didn't get confirmation today (for a TZA buy). So, we look for the same confirmation tomorrow.

    Basically, we need a white TZA candle tomorrow. It's ok to buy TZA during the market day if it seems likely that the day will end with a white candle.

  • http://dreadwinaard.livejournal.com/profile dreadwin

    I would feel a lot more confident about TZA going up if the RSI on $RUT would have hit 70 recently. It hasn't done that (yet). We could still tag the lower BB on $RVX at 22ish before we're done with upside buying pressure.

  • http://dreadwinaard.livejournal.com/profile dreadwin

    I also think we have more upside left this week.

  • Stock_tech

    It could go to 105 but most definitely 106 in the coming 2-3 weeks. IMO we will see.

  • monicadern

    You can't have a worse track record than me! Anyway, I'll be interested to see if the Bradley turn date on Monday has any significance. If it does, I would imagine we run up to 1115 by the end of this week before turning over. I'm staying short. Too many signs pointing south long term to me. Check out etf-corner tonight. Serge did a video about all the world markets. Most of them have already displayed clear tops and are on their way down. I think it's only a matter of time before the same happens here.

  • http://www.reddragonleo.com Red Dragon Leo

    Yes, in the next 2-3 weeks we could go down to the double bottom at 1044.50 spx. That I agree with you on. I just thought you were talking about falling down in the next 2-3 days. Sorry, I mis-understood you.

  • Earl of

    Sunday is a Full Moon. The moon trade switches to TNA.

    Full Moon + Bradley Turn date. No idea how that comes out.

    One day at a time :)

  • monicadern

    Not sure I give the full moon much credence. But you have been trading TNA/TZA much longer than I have so you probably have a better idea. What will we do when the government eliminates TNA/TZA? We will have no identity!

  • monicadern

    Red, Anna posted that she saw a fake print this afternoon at 109.79. Just an FYI.

  • bensjoyce

    I'm not sure what you mean by a multi month reversal.

    a monthly close (by this friday) above 1115.10 $SPX means the S&P goes up to new highs (above 1150) or reverses down and breaks 1045?

  • http://www.reddragonleo.com Red Dragon Leo

    I love having you here… chatting about TNA stuff (wink). Just keep it fairly clean… OK? LOL

  • Earl of

    I'll do my best :)

  • http://www.reddragonleo.com Red Dragon Leo

    Yeah, I spoke with her about it. We'll probably tag that level tomorrow, as they are pretty accurate. Don't know if we will break it or not, as that's the lower trend line on the rising channel in the 60 minute chart I posted above.

  • monicadern

    interesting. Thank you! Maybe we will open there and move higher.

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