Market Tell - Confirmation vs. Non-Confirmation Between Indices

Non-confirmation of the NASDAQ versus the broader market, leads to late session sell-off. The S&P futures easily took out the PDH and continued to trend higher, almost reaching a full retracement of the last leg lower as depicted on the ES chart below.

The NASDAQ futures, on the other hand, stalled at the test of the PDH. When the NASDAQ failed to confirm the price action of the broader market, it was a tell. The bears stepped in on the non-confirmation leading to a late session sell-off.

Technical Picture - Bulls Get Ambushed

Yesterday, IBD changed their current outlook from "Market in correction" to "Market in confirmed uptrend" based on a high volume follow through day on the NASDAQ as depicted above. Today, they are saying that the rally is in its third year and any new uptrends can fail because the rally is tired. So what observation can we make from this? Just looking at the NASDAQ chart above, two observations can be made:

1. It took four consecutive higher closes to get a confirmed follow through off the reversal last week. That's a long time and should be considered suspect.
2. The follow through day occurred in the ambush zone (50-62% Fibonacci retracement level).

Overall economic data has been soft in recent weeks and today's ADP private sector jobs was even softer, ie. dismal. Top that off with a lower than expected ISM and we had the makings of a real market drubbing.

The 60 minute SPY chart below highlights the double top in the ambush zone. Two trendlines were broken as the bears took over with a vengeance.

There's lots more economic data over the next two days, including the real jobs data on Friday.

The $USD held minor support and bounced.

In my last post, I highlighted a number of stocks setting up. Most of those daily charts are broken after today's session, but we did manage to get some good day trading action.

ERTS broke out of a daily bull flag yesterday.

NVLS set up a long above yesterday's lower base. Took a partial at $37.00 and was stopped out on balance.

MELI, which was my favorite long setup (also included in HCPG newsletter last night), had a beautiful rip after consolidating the opening range and forming a C&H pattern overlapping with the previous session. Euphoric volume spike foreshadows the end of the move.

As we can see from the daily, the BO failed and we have a bearish shooting star.

In my last post, I said that RIMM was a box play. The box was breached in pre-market, so I placed a sell stop just below the pre-market low. Took a partial after three consecutive WRBs.