The sharp sell-off in the indices felt worse than it actually was. The decline gernerated extreme readings in Breadth that almost always mark important lows in a bull trend. The ideal would be a lower low in the next day or two that sets up a price/Breadth divergence leading to a robust rally. If that occurs, the ensuing rally will tell us a lot about whether or not the stock market is entering a time/price correction that so many have been calling for.
If the S&P cannot rally much over the next few days and takes out 1538 it is potentially very bearish and would be another signal a correction of significance is in progress.
We had been favoring the short side in Gold for months, and had been looking for the spike down that certainly occurred in dramatic fashion beginning Friday. I am still looking for lower lows in Gold as the incredible downside momentum works off.
