It would be easy to get caught up in the selling right now, and extrapolate the past 3 days of selling into a full-fledged potential waterfall. Especially since there certainly is the potential for a waterfall decline right now.
But I don't think it's coming over the next few days, with options expiration looming, as well as next week's Holiday-shortened trading schedule. It's more likely the ranks of traders will thin out over the immediate future, and volatility will contract. That should end frustrating just about everybody, which is something the market likes to do.
Yesterday my putative "down fractal" picked up some steam, and raced down to touch my tentatively drawn "line of central tendency."
Usually at this stage of a fractal, the markets will stage a counter-move. But ultimately, this fractal is projecting lower -- and possibly much lower. If I have this scenario analyzed correctly, we should see a counter-move back to the upside that stays within reasonable retracement boundaries. The market shouldn't bounce too high, too quickly now if this scenario is indeed correct. So far the down fractal is pretty textbook, so it's reasonable to expect the textbook retracement right now..
The textbook way to play such an unfolding fractal is to wait for the significant counter-move before taking the plunge. And there always is a counter-move. Ideally for a short you'll want to see sentiment measures getting more and more bullish as the market only manages to grudgingly grind away at some of the recent quick losses.
It's my feeling that the next down leg -- after such a grind back higher -- could be the whopper, and it may take a while now for this scenario to get in gear.
If I'm right, this quick drop from 1063 was merely the opening salvo in a developing selling epidemic. But unless the markets are hit by a dramatic, obvious catalyst, bigger mid-term declines have a tendency to start slowly, grinding away at both bulls and bears alike before really taking off the downside.
One macro thing to keep in mind here is the serious damage to the U.S. dollar yesterday. It got smoked down to new multi-year lows, while stocks also got hammered. A synchronous decline in stocks and the dollar has been one of the things to look for to show a potentially bigger decline is underway, and it's happening now.
So we'll continue to sit tight and monitor the action, as there is really no pressing need to do a position trade against this long-lasting uptrend until the safest possible moment (such as it is) -- which is still a little ways away in my estimation.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Filled by 2 points to 13% full of negative sentiment.
SHORT-TERM: In a short-term decline phase that's getting pretty long in the tooth.
MID-TERM: Progressed 10 points in on the decline side to 38% with Confidence progressing to a bearish 3 (bearish Confidence levels now notated with "minus" signs and bullish levels with "plus" signs .
LONG-TERM: Progressed 2 points to 20% on the decline side with Confidence at a bearish 2 (out of 7).
BOTTOM LINE: We expected a short-term advance phase to kick in once we got the firm mid-term sell signal. But a.m. strength got almost no traction at all and the market slid down a slippery slope late in the day. Why? There were too many bulls early in the day. Early in the session the intraday Put/Call Ratio was down near 0.5., indicating heavy call activity. Too many bulls...and when the market didn't hold its early rise the bears piled on. Fast money is now riding the sell signal. The mid-term trend is down.
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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