IWM at new closing low - downward momentum accelerates

October 3, 2011


By Geoff Bysshe

Friday was a mixed bag of pivot stack condition in if you included KRE and XLF which were positive along with the DIA. Everything else had negative stack.  Before Friday is forgotten, I'd recommend taking note of these two important events for future reference.

1. The DIA was the only market watch chart with positive stack. When it rolled over to create a short OR reversal it was below its pivot. Moral of the story is, that is a negative.

2. When the markets where rolling over for their second short OR Reversal, the financials were taking out their lows of the day! Major divergence.

Monday will begin with all negative, and the IWM and a new closing low relative to the 2 month daily consolidation we've been watching. And the Q's closed below their channel low and daily swing low.

For a more detailed analysis of the big picture make sure you watched Keith's video in his weekly Market Outlook column.

For our day trading approach, this means everything is negative:

  • the phase is bearish
  • The 10, 20, 50 MA's are negatively slope and stacked in all 4 market watch with the Q's having a very marginal positive stack of the 10 and 10 day.
  • The 3 day pivots are negative
  • The pivot stack is negative
  • And trend lines and swings only suggest that there is support in all market watch charts at the lows of last week in the IWM, SPY and DIA, and the August lows in all 4.

In short momentum is picking up on the down side with only the daily swing lows to trust as reason to believe the market will stop going down.

With everything being negative, short OR reversals and OR breakdowns that are not extended should be the priority.  If the market comes in significantly lower we may need to break the rules and fade it if we have support to lean on. But if a lower open is below key support, I would not fade it, I play the breakdown.


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