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Wednesday, October 28, 2009

Anatomy of a Sell-off

Trades for October 29, 2009

/ES Range Estimate for All Sessions

E-MINI S&P 500 DECEMBER 2009 CONTRACT
( 1023 - 1030 - 1038 - ( 1045 ) - 1053 - 1067 - 1082)
(subject to change after evening session


It was decisive; it was relentless; it was significant. The market has undergone a distinct personality change in recent sessions, with Wednesday's continuation sell-off plunging stocks and the major indices into deeply oversold territory. Market internals were absolutely abysmal, with declining issues all but eclipsing advancers and up/down volume approximately 10:1 negative. Volume escalated, trendlines were violated, the $VIX vaulted from its comatose range, and the bears scored an uncontested, blow-out victory across the board. The correction has been long overdue, and is still well within standard pullback targets-- but the nature of the selling will need to be carefully monitored, as will any ensuing bounces in the days ahead. The sellers are serious this time around.

Just a few charts for review to see where we are-- a look at DecisionPoint.com's Nasdaq McClellan oscillators, $SPX, GLD, and IYT. The $SPX chart looks at an interesting interior trendline that I monitor, but that took on an increased significance today. I want to mention that springheel_jack also noticed the same trendline and posted his own excellent chart in the comments section tonight as well. We'll see if it holds for at least a short-term bounce as it has several times in the past.









That's it for now. There's a slew of economic data set for release before the open on Thursday which could set the early tone, but let's see if some sort of snapback rally can get underway before the day is done. Trade well. --Brinkley
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