Stocks lower again

q0206.pngStocks opened higher today, after the plunge on Tuesday, but the market started to fade, and the move was fueled a bit by Philly Fed president comments. The market staged another selloff that is continuing into the evening as I write this. Today I will include the Nasdaq ETF, as that index is already very close to testing the previous low. The S&p is about at the halfway point to the same low point on its chart. On the QQQQ chart the low of today is already posting a new closing low for this move, although the intra-day low is still a ways away. If the downmove in the futures hold into the day session on Thursday, that low is in danger of being taken out. The important test will be what happens when those levels are reached. There will either be rejection of those lows, or the lows will be taken out, and if prices start accepting those lower levels, another downleg could occur. There is often symmetry in the impulse legs. If the market repeats the duration and size of the previous impulse down, there could be much more pain for the bulls. It is far too early to assume that will occur. I’ll just try to judge the action day by day. When momentum turns in the same direction as the overall trend, the price movement seems much easier, with better follow-through.
Here’s the Advance/Decline ratio of the Nasdaq Composite, with a moving average of the ratio. You can see a deteriorating situation with a divergence on that second high in October, and the ratio has been in a steady decline below its moving average the whole time, despite several rally attempts. I’m watching for any bullish divergence between prices and the ratio for an early warning of a reversal back up. I’m not holding my breath.
Gold made some recovery from the large drop on Tuesday. It bounced right off the slower moving average line. My fastest momentum indicator has turned back up. It will be interesting to see if a rally can challenge the high of a week or so ago. Trend is still up so not ready to probe short side yet, although my gut feel sure wants to.

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