Bids were completely absent today as market dropped back to key resistance / neckline of head and shoulders pattern that everyone on the planet is watching closely.
While bears put together an impressive down day, bulls managed to hold 200dma and the neckline, those two levels will continue to be key.
Today’s last hour volume was highest in a month (since 6/8) for proper confirmation of the pattern, would need some high volume follow through and successful backtest of the neckline. Several hourly closes and a daily close below the neckline being very important in taking another bearish step.
For bulls to get something going they will need to tackle the following levels:
- 882 - this weeks 3 time support level on hourly charts
- 886.75 retracement zone from this weeks high which will be laminated with 50 ema hourly.
- 898 big recent resistance level with 200ema hourly and 901.7 - 50% line from last week’s high right above.
Will use those levels to guage further directoin of the market.
Market Internals & Technicals
TICK & STOCHASTICS
Today $TICK put in new 11 day low, here is a chart of what happened when $TICK puts in a low below -1200 and also sum of $TICK high and $TICK low of the day is at -175 or lower:
Firstly, note that 5 day stochastics are at oversold level seen only 3 times during this rally, based on stochastics alone bounce here is rather likely.
Secondly, vertical lines highlight days with sub -1200 tick readings and sub -175 tick hi/lo sum days usually followed by bounce
PUT / CALL RATIO
Our recent good friend Put/ Call ratio has closed above 0.95 line once again, this time closing at 1.0279 reading:
This is 8th time during this rally we got this reading during the rally off of March lows (vertical lines), most have resulted in market moving up, for multiple days on 5 of 8 occasions.
This is also only 3rd time that put/call ratio reading above 0.95 and 5 day stochastics in oversold territory (under 20), two previous instances resulted in 2 and 4 day market advances.
If you are short: no reason to cover right now, hiding behind one of the “key levels for bulls to get above” from the update and letting the trade continue work would be wise.
If you are flat (myself): you are way too late to the short party at the moment, wait at least for some retracement before considering entering shorts, if it goes down from here, oh well, odds werent in your favor. Taking higher probability long setups considering market internals clues is what I will be doing.
Markets are in key juncture at the moment, will be keeping a close eye on the price action and will have updates via Twitter and blog as key technical developments take place. Will be particularly focused on US market open and first hour. Will keep you posted