Bottom line for this week:
The short-term critical upside level is more well-defined as of Friday’s close as are downside levels.
Closes by all four of the primary US indices above Thursday’s highs may signal an important low is in place. I say “may” intentionally. As much as we would all like for trading to be black and white it simply is not. We would also need to see this occur on very strong breadth and then relatively little retracement following closes above Thursday’s highs for a bullish assumption to be valid.
Below Friday’s cash session lows there is little potential “support” and we would like be in the final stages of a downside washout. Again, all four of the indices would need to take out Friday’s cash session lows to increase this possibility.
The SPX stopped the recent decline right at its 200 day MA, an area of technical note because it is a broadly watched indicator. From an Auction market perspective there is no “support” below Friday’s low until just below 3900.
The NDX also stopped at its 200 day MA on Friday. Below Friday’s low the NDX is truly in the abyss and there is no obvious potential support from an Auction Market perspective.
Below Friday’s low there is nothing from an Auction Market perspective until near the pivot low of 1/19, near the 200 day MA at 1826.
The picture in the DOW is quite clear. The DOW traded into a CRITICAL downside level on Friday. If the DOW breaks Friday’s low there is a really high probability the washout scenario discussed above is underway.
The DOW has been a text book case in using the profile graphic to help identify Market Condition – it’s originally intended use.
Last Tuesday we had the second NYSE closing breadth in the past 91trading days. In bull legs -2000 NYSE breadth readings usually occur very close time-wise to important pivot lows. In bear trends they tend to “cluster” into short-term washout lows.
Neither the 5-day nor the 10-day MAs of NYSE advancing issues is at an extreme. If we are in a washout scenario we should see both lower than at anytime since the New Year began prior to any significant rally attempt.
If we are in a washout condition any breadth reading close to +1000 should immediately fail, and there should be consistent very negative intraday breadth readings.
If the washout scenario is underway VIX is not likely to top out until 30+.
Gold has been straight down for the past four weeks. I would be surprised to see it slice through 1801-1777 prior to some retracement/Balance.
Crude is between intermediate term levels.
Momentum is up.
US 10-yr. Notes
Notes are increasingly due for at least short-term Balance.