The S&P gapped down on the open, made its low in the first 5mins of trading, and grinded higher for the rest of the day closing just off its highs. I think we should be very careful to call any kind of low yet as we need to see more base building I believe but this was certainly good price action given the panic earlier in the day.
It is also important to highlight the breadth readings. Yesterday NYSE decliners closed at 2379 vs a high of 2833 registered in the morning- a very significant intraday reversal. This closing figure also shows important divergences with prior days in this current downtrend:
22/2/11: 2729 NYSE decliners
10/3/11: 2524 NYSE decliners
16/3/11: 2379 NYSE decliners
As you can see, despite price making lower lows, the number of NYSE decliners is not following through. These are significant divergences which shows that this sell off thus far is not being confirmed "under the hood". I think this should be paid attention to.
The S&P 500 Daily hit a low of 1260 last night at the low end of a potential trend channel. For position traders, it would take a close above 1295 to confirm the low of this channel has been put in
S&P 500 Daily:
The Nasdaq 100 is at a very interesting juncture and has setup for one of my favourite trades- a Failed Head and Shoulders pattern. Head and Shoulders patterns are widely perceived by technicians and the market as major topping patterns. My personal experience is that they are hugely unsuccessful patterns and the best money is made from actually fading these patterns once they have clearly failed. A break back above 2300 would be a strong signal to get long. For now we are in wait and see mode
Nasdaq 100 Daily:
Nasdaq 100 60mins:
In sum, it is far too early to call a low of any sort as the hourly trend remains down. Bearish sentiment did reach a fever pitch yesterday and these are exactly the kind of climatic conditions that lead to great trading opportunities. There are a number of open gaps which should now act as natural targets. Keep 1295/1300 on the radar and if we can close back above here, a new trend up may have begun. Support for now is 1260/1265. The Nasdaq 100 is a buy above 2300 but wait for it to cross first.
More charts later but lots to focus on for now.....
Thanks
Austin
