Stop me if you’ve heard this one before.
On Friday, 9/30/2011 the $SPX lost 28.98 pts, 96% of the volume went into declining issues, $NYUPV dropped to 79.21, $NYUD:$NYUPV dropped -14.64, the $TRIN closed 4.09, and the P/C Ratio closed at 1.25.
Clearly the market was oversold, but then…..
On Monday 10/03/2011 the $SPX lost 32.19pts, 96% of volume went into declining issues, $NYUPV dropped to 43.04, $NYUD:$NYUPV dropped to -30.32, the $TRIN closed at 3.01, the P/C Ratio closed at 1.28, Zweig Breadth Thrust dropped to 38.81, and $NYMO came within 15 ticks of its lower Bollinger Band.
Clearly the market had become even more oversold. I made note of the back-to-back 90% down days and at the time I could not recall a previous instance of this. I still can’t. I didn’t know what to make of this at the time. Days later I would post something like, “Well, maybe it was those two back-to-back 90% down days, after all.”
But that was then and this is now.
On Monday, the $SPX lost 31.78pts, 92% of the volume went into declining issues, $NYUPV dropped to 73.82, $NYUD:$NYUPV dropped to -12.94, the $TRIN closed at 3.24, and the P/C Ratio closed at 1.28.
Today, the $SPX lost 35.02pts, 93% of volume went into declining issues,$NYUPV dropped to 73.10, $NYUD:$NYUPV dropped to -15.99, the $TRIN closed at 2.35, the P/C Ratio closed at 1.35, and $NYMO pushed through its lower Bollinger Band.
So we have a situation similar to that at the end of September and the 1st of October.
Is it possible that history will repeat? Is it deja vu all over again?
I don’t have an answer to either of those questions as this market is the strangest I’ve ever seen. But the market has an answer and it’s going to provide the answer tomorrow or some other day this week.
On Tuesday, October 4th, about mid-morning, huge ‘buy’ programs kicked in and the rest is history. How likely is it that something like that will happen some time this week? Probably pretty unlikely, but in a news driven market you just never know.
From the “Be careful what you wish for file:”
Over the weekend I suggested that the market probably wouldn’t be able to maintain momentum and that there was the potential for a bear flag pattern developing in the weekly charts. It’s a little too early in the week to be looking at the weekly charts, but the lower trend line of the rising price channel on the weekly chart is sitting right around the 1180 area. If the $SPX can’t hold round number voodoo support at 1200, it isn’t likely to hold trend line support, either.
Chart below of IWM in the 60min time frame:
Chart courtesy of FreeStockCharts.com