According to Floor Talk, the catalysts for the selloff were negative commentary out today on BIDU by someone at JP Morgan and from an ECB governor suggesting the ECB may need to raise rates to a restrictive level to get the selling pressure rolling. Okay, so we needed a catalyst because the bears were unable to get the party started.
The intra-day chart above, as I pointed out last night and the night before, was signaling negative divergence of the RSI to continuous higher highs. So, regular readers were not taken by surprise. Bye bye BIDU, hello volatility!
While we could get short term gap support (area highlighted in green on 15 minute timeframe), the daily bearish engulfing pattern and aggressive nature of the decline argue that the corrective action is not complete. Volume was well above recent sessions (not mere profit taking) with internals firmly in the bearish camp. Decliners outpaced advancers 2071/878 but new highs outpaced new lows (245/84). The SOX and internet sectors paced the way down.
Economic Calendar: PPI in pre-market followed by Michigan Sentiment at 10:00.
4 comments:
I know that this is a loaded question, but what do you think about the intermediate & long term prospects of this market. I'm not sure if should start loading up on the longer term puts just yet.
Lloyd,
This market has been moving up on hot air ever since the notion that Big Ben could, and most probably would, lower interest rates. I don't know what BB's next move will be so I can't answer your question. The jobs data certainly suggests no more rate cuts, but if Cramer has another conniption on live TV, who knows.
Sorry that I can't answer your question in a more meaningful way, but irrational exuberance, as the former chairman put it, defies logic.
Bearish projections after a one day selloff really makes me think that we are only starting this rally.The market was way over bought and extended and it needed this break. This selloff should have caught no one by surprise. Market could easily be at new highs before year end.
Stewie.
Stewie,
Not sure I'm understanding you correctly re: rally just getting started - this rally is in its 5th year last time I checked a long term chart. The bearish projections sited in this post are short-term. But IMO if the market doesn't correct in a meaningful way, it will be far worse later on.
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