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Super Suicidal Markets

No good news arrived over the weekend and instead bad news came from multiple fronts all at the same time from Europe, China, and the US itself.  US seems to be more afraid of it's own shadow ($14.7T Dept) causing the Dow Jones to lose more than 300 points in the morning session

It is not so often that bearish news came knocking all at the same time.

The good news is that Dow Jones did not go 500 or more points and was able to recover a portion of the loses before closing time despite the decidedly bearish tapes that persisted all day long:

Nothing is confirmed for the moment.

Dow Jones is still considered 65% bullish while Compq is already at least 55% bearish after it broke below 2518 as discussed on the previous instablog.

SnP500 broke well below it's daily 50ma today and is considered definitely bearish by traders who prefer to use the daily chart moving averages. 

For those who prefer to use the Fibonacci Levels;  SnP500 can be considered 'resilient' being able to retrace only 50% of the Oct 4-27 rally in 3+ weeks of slow and grinding run down.  Unfortunately, the run down is starting accelerate today at the start of the 4th week that makes it highly questionable whether the 50% Fibo support is going to hold.

For the weekly and monthly chart traders;  SnP500 is testing the weekly 200ema and the monthly 50ema supports today.  Still bullish for medium to long term traders and analysts.

For today, the chart patterns are at their biforcated levels and the struggle for the bulls and the bears can be considered practically a toss coin.  The run rates as detailed on the charts should provide the determining factor(s) whether the major indexes will go into meltdown or a rally in the days and weeks ahead.

I bought YM and NQ today using the double divergence buy setup on the 5min chart also called 3-pushes down:


The Double Divergence Buy Signal is very useful when trying to counter-trend a possible capitulation selloff.  It worked the last time I illustrated the trade setup several months ago and I actually used the pattern many times over using different time-frames and decided to illustrate the method again today.

However,  this time around,  there are far too many run downs coming from the top that are potential 1-st waves and/or i-st waves that have no definitive corresponding 5-th or v-th waves to the downside making this trade extremely risky if the trade is not supported by tight hard stops and/or trailing stops.

So be very careful using the Double Divergence Buy Signal in such situation(s) when there is no clearcut 1-2-3-4-5 wavecount.

For the majority of short-term traders;  they are going to wait and see whether SnP500 will be able to recover above either the daily 50ma or the 50ema levels.  Preferably, SnP500 should be able to break above 1215.57 and use that level as a support instead of a resistance. 

Another approach is to buy if SnP500 makes a divergence buy signal tomorrow if it goes down marginally using the 30min or 15min charts in order to reduce the potential risk factor to the minimum.

Otherwise, If SnP500 goes into another big selloff tomorrow, then a meltdown will become higher probability.

When Dow Jones is bullish and Nasdaq bearish (or vise versa);  SnP500 usually acts as the referee.