$SPX has not yet closed below Friday’s low of 1373.03 and if that’s going to happen then it’s probably going to happen tomorrow. However, there are a couple of things that suggest that we may actually get that bounce tomorrow, and the positive reaction to CSCO’s earnings is only one of them.
Zweig Breadth Thrust closed at 41.57 today. This would be much better if ZBT had closed at or below 40 but this is the lowest close for ZBT since the June lows. Back on September 26th and then again on October 1oth, ZBT bottomed at 43. Each of these readings led to a bounce of several days, though the bounce that started after the October 10th reading didn’t start right away. Given that today’s reading is even lower than the other two mentioned low readings and is very close to the important 40 level, I am going to assume that the bounce that should have occurred by now will finally start tomorrow.
4wk New High/Low Ratio closed at 13.56 and this is just a few points higher than where this ratio closed in June so this is clearly oversold.
Also, $NYSI dropped by 55pts today, While a drop of 70-80 pts is an indication of a climax bottom, today’s 55pt drop is the biggest one day drop going back to mid May when there were drops of -100pts. So, while a drop of 55pts does not indicate a climax selling event, I think it indicates selling exhaustion for now.
$SPXA50R closed at 29.40 today, its lowest reading since the June lows. When this thing finally bottoms, it will do so below 25, like it did back in May and early June, but the stars are not lined up for a bottom here, just a bounce, and I think this reading is probably low enough for the moment.
$NYMO w/Bollinger Bands closed 11pts above its lower BB. While a tag of the lower BB is always preferred, I think this is close enough for now.
And that’s it. I’ve been thinking since last Friday’s candle that we’d bounce sometime soon and really thought we’d get that today but that didn’t happen. Now I’m thinking that this bounce will start tomorrow, but I wouldn’t bet on it. As long as we don’t close on the $SPX below 1373.03 tomorrow, then I’ll keep holding out for a bounce. A real bounce should last 3-5 days, may run to the levels I mentioned yesterday, and should be very convincing but I don’t think it will last as longs that are trapped at higher levels will sell into any bounce.
Just be careful & GL