Stocks close lower, but well off lows of day, Gold higher, but well off highs

NOTE: I’ll keep the post from yesterday up another day, as I have nothing new to say. I have one new chart to post at the end of the blog. For some time I’ve been warning of bubbles popping, and more popped today. But I need to take a long break after this turbulent week and shut of the computer. If you already read what was posted on Thursday, scroll down to the last chart for an update. I’ll be back Monday.
Bubbles started to pop today. Many of the Chinese stocks and the handful of US tech names started to crumble today. However, ofter one false start mid-session, the Dow and S&P staged an impressive rally to pare losses. In fact they were both up for the day briefly. The Nasdaq had a more difficult time mounting a rally, but it did come off the lows. The Nasdaq 100 futures contract was down the 100 point limit for a brief time. If this the start of a more prolonged downtrend, there will probably be a few rally attempts that fail to turn the trends back up. Bargain hunters that don’t believe it is possible for this market to ever go down will try to buy the dips, until they stop believing. If the previous swing highs are taken out,then this drop will go down as nothing more than a nasty correction. However, the market structure at the moment is bearish, so the bear is justified in being in the upper left corner. I’ve had some requests to replace it with Gisele (see blog from Monday if you missed that).
The chart to the right is one I have been showing every few days. The upper chart is the Nasdaq/QQQQ which still has the same lines I drew when prices were forming a negative broadening formation. There was one candle that took out the upper, rising line. When prices pulled back in the following day I suggested it would be very negative if prices took out the lower line. It tried to take it out today, but the rally at the end of the day brought prices back inside. Somewhat negative is the break of that minor pivot on 10/22 where the red line is drawn from. It did close under that line today. The same point is on the S&P spider in the lower sub-graph. Since the swing was more pronounced on the SPY, and there was a subsequent lower high swing point, the SPY looks more bearish to me. However, there was a greater downside move in the Nasdaq today, and the SPY did recover better from the lows. I would expect some rally attempt since the prices rejected the lows. It will be interesting to see how far a rally can go before another wave of selling hits the market.
To the left is the same chart of the FXI that I posted yesterday, but updated with the drop today. The double top and break-away gap leave this chart looking very bearish. Prices closed under the swing point today, although, like the other markets, it rallied back up a good distance from its lows. Also, the double stochastic is now oversold, but no divergence. I would expect some rally attempt, as the mood is still very bullish toward the Chinese bubble. Unless the highs are taken out, the trend indicator will roll over, and reversals down in momentum would probably make good shorts. By the way, the is a new ProShares etf launched today that trades the FXI inversely, and with leverage. The ticker is FXP. There are also fairly liquid options available to those who possess timing skills.
Gold was up a bit on the close, but had been up sharply earlier in the day, and also traded briefly on the downside. The dollar was down again, probably on a spill-over from some Chinese officials joining Gisele in bashing the dollar. The dollar is deeply oversold and sentiment much too one-sided. Crude closed down a little after being higher. It is one of the larger bubbles looking for a pin. There is little logic fundamentally to justify a price near $100. It may well go higher if funds keep pouring money in, or maybe Gisele will start buying. But at some point, watch out.
The chart to the right is an update of the S&P SPY etf updated as of the close on Friday. The stock indexes tried to rally off the lows today, but in the final part of the session they gave up and closed near the lows. I drew two regression channels, with the red lines linear regression lines, and the yellow lines 1.5 standard deviations above and below. The two impulses down in the S&P now show some symmetry. Current impulse moves often will mimic in duration and angle approximately the previous move. I would expect some reaction back up to relieve the now oversold reading in the double stochastic indicator in the sub-graph. Bargain hunters should be expected. If the rally turns into a dead cat bounce, the next selling wave could take the indexes down much more. The Nasdaq was hit especially hard today, as the popular bubbles such as goog, aapl, rimm, bidu, fxi continued down, as has been the warning here for some time. Gold fell a bit, but expect that to pop as soon as the extremely oversold and battered dollar rebounds, and the oil bubble pops. There is much speculation that option expiration on of the oil options next Tuesday will hold prices at or above $100. I have my doubts. That news is known by everyone and is certainly in the price already.

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