Stock indexes continued the downtrend today. Yesterday the indexes got a bit of a boost after the fed announcement, but by the close the indexes started to fail. Today the selling came back in and the commodity surge resumed in oil, gold, and grains. The Nasdaq has held up better than the S&P. On the chart above you can see that the Nasdaq, or in this case the QQQQ etf, fell right to, or slightly below, the 50% retracement level from the start of the rally on March 11th to the high on June 6th. The S&P is closing in on a complete retracement of that rally. The volume on this decline has been heavier than it was on the rally up, but not close to the high volume on the climax lows in January and March.
The above chart is of the S&P etf and gives a longer view, with the advance/decline line in the sub-graph. I’ve posted this chart many times in the past pointing out the deteriorating technical condition. There was a huge bearish divergence that failed to confirm price highs in mid-October, and the A/D line has been declining since, and hitting a new recent low today. There is little to go on to guess when this decline might end. Crude oil is one of the problems. If Israel attacks Iran, the super-spike forecast for crude oil would likely happen. It seems if there is an attack it would occur prior to the election. Maybe it is just sabre rattling. The crude oil trend is still strongly up, but this last impulse wave seems to be on the flat side and looking tired. Fundamentally it seems oil has already discounted a war between Israel and Iran and the growth in China demand and the next administration that probably would not be in favor of increasing oil supplies through drilling (and would rather see us all driving golf carts while they drive around in limousines).
I still haven’t quite gotten back in tune with the markets after such a long vacation. I just regret not changing the baby bull back to the bear. But my mood now is that things look so bad that maybe the markets can still find some support. The S&P is testing the yearly lows while the Nasdaq is at the 50% level. At least a bounce could occur. Sentiment is about as negative as I’ve ever seen it. If a cycle back up should occur, much could be learned about the volume pattern, the A/D line, and where the rally stalls out. I don’t feel like chasing this market down. I find that just when the market looks like it will never stop dropping, it does stop dropping. I wish the volume had shown a sign a capitulation. That is likely still to come.