As Expected, Big Down Day Arrives

The big down move day came Monday as expected . This chart shows that Monday was the biggest down day since the rally started, and the second 9-to-1 down volume day:

It was actually a huge 27-to-1 down volume day, with the SPX closing at its low and breaking last week's low, meaning the S&P 500 will have its first lower low since the rally started, breaking the trend of higher lows. In this one day, the market gave back the gains from the last 2 weeks and more.

Monday was clearly a trend down day, with hardly any positive ticks seen on this 1-minute NYSE Tick chart:


There was hardly a bounce during the day, with down volume vs. up volume steadily increasing, along with TRIN, indicating strong volume going to the losers. TRIN closed pretty high, near 3, so there should be a rally attempt at some point tomorrow, or a gap higher.

The updated hourly chart of the S&P 500 shows a break of the huge rising wedge along with a continuation of the PPO bearish divergences with the amazing 5th lower high on PPO (accompanying 5 higher SPX highs) and its bearish cross sell signal:

The break of the huge wedge should mean this pullback will go significantly lower, though there may be a short-term bounce back toward the breakdown area first.

If this pullback follows the pattern of the previous 5, the S&P 500 should make a lower low tomorrow, though it might bounce back short term from there.

Comments

[jkh307:]

Good charts.

Apr 21 10:49 AM

[john the ba...:]

like the fib retracemetns on chart 3. A fib retracement of 38.2% = 741 on SnP

Apr 21 10:56 AM

[Carl Spackler:]

Today should be a pause day in the action with the S&P bouncing between support at 820 and resistance at 850. We need some news to get a move in either direction going. You are right that the market has broken its pattern and appears to have brokern a rising wedge formation to the downside. These moves usually have a headfake up before they resume downward. For a good down move, I would like to see some bulls get trapped by a fake rally up to 850. If the market breaks 818, however, we could see the downleg early.

Apr 21 10:56 AM

[Prudent Man...:]

We still have not ascertained the damage from the credit/derivative balloon bursting. Until that time we will not be able to create strategies necessary to adjust to the dynamics of the political and economic realities. That is in the distance future.

Charts are great for historical purposes but irrelevant for projections as history never repeats itself, with the exceptions of its errors, in the same way.

Today's political and economic realities are continuing dynamic and unprecendted. For anyone professional active in markets this fact has to be dealt with as risks are continuing to increase not decrease as many believe.

Apr 21 11:01 AM

[asaf123:]

With expected 2009 Earnings of $13-$15, the index is still trading at a P/E over 50+

Apr 21 11:01 AM

[cameroni:]

When it comes to news I am all ears for the automaker time-bomb filing of chapter 11. So many other things on the agenda before months end. Could we actually be headed for the discovery of a new low. I think so.

Cam

Apr 21 11:19 AM

[Gyoza Mimi:]

Oh, man, someone finally wrote a test recognition software. It does recognize article meaning, at least partially (that is a huge leap in AI area), but yet it is unable to provide meaningful comments, submitting only generic "canned" responses. The robot posts under the name of "Cetin Hakimoglu".

Apr 21 06:47 PM

[multitrader:]

Prescient reply, Carl. Curious... what are you (and others) expecting tomorrow? I am thinking we might run all the way back to the bottom of the wedge formation, retesting at the ~859 level on SPX.

The action today in financials and in real estate was laughable, in my opinion. Components of the IYR are issuing stock like nobody's biz and pushing their stocks up in the process. I would issue my own stock every day of the year if it meant 5%+ upswing in the price every day.


On Apr 21 10:56 AM Carl Spackler wrote:

> Today should be a pause day in the action with the S&P bouncing
> between support at 820 and resistance at 850. We need some news
> to get a move in either direction going. You are right that the
> market has broken its pattern and appears to have brokern a rising
> wedge formation to the downside. These moves usually have a headfake
> up before they resume downward. For a good down move, I would like
> to see some bulls get trapped by a fake rally up to 850. If the market
> breaks 818, however, we could see the downleg early.

Apr 21 07:56 PM

[cameroni:]

You are truly an optimist Cetin. I applaude your gutsiness. But I don't agree with your bullishness. Not in this environment. Be careful though because the bears are going into a feeding frenzy and you might get bitten.

Cam

Apr 22 12:53 AM