Tuesday Outlook: Technical Breakdown

Before the open Monday, things looked bleak as Asian and European equity indexes were being pummeled. Surprisingly, US markets rallied quickly off the pre-open and opening lows on not much news until positive home sales data gave bulls another reason to pump things. We turned positive, but in the end, no one wanted to stick around on the long side and stocks were in a sharp free-fall into the close.

Volume was respectable but breadth showed continued distribution.


















The following chart may be the only chart you need to see. Last Wednesday I posted the 10-year monthly chart and here it is again, updated.












I know everyone is looking for bottom-picking opportunities; or is sitting on stock they still wish to sell; or is waiting for a rally and so forth. Below is a weekly chart of the NDX 100 Index with Tom DeMark “weekly sequential” annotations. I won’t go into how these are calculated but I wish to draw your attention to the “8” under the last price bar. This means that this week barring a moon shot higher of 500 NDX points, a “9” will appear. This often signals the end of whatever trend is in place but not always. Not always? Yep, when trends are very strong, few technical indicators function well and this impending “9” could see the market blow right through it lower.

The chart below is from our internal proprietary systems with DeMark overlaid. It is deliberately abbreviated but I just wanted to point out the current condition on weekly charts from last week.

click to enlarge





















I’ve used the above image of our little horror film friend to describe US consumers (Chucky). You can’t stop ‘em from shopping. There have been continuing reports of 'Chucky's' death but then that sequel keeps returning. Now, unless the Fed and Treasury mail out Christmas gift cards to taxpayers from Walmart (WMT) et al, the dude is toast.

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