S&P 500 - August 26, 2010

One kind of suspects how weak (penniless? - uninterested?) bulls are when what seems like a simple intraday setback causes a rapid deterioration of intraday breadth and the tick.

Yesterday’s bounce off the lows ran quickly into trouble today. Just past noon, I posted a 5-min chart of spy and said:

“Index is in a middle of a gap. Bulls should really fill and exceed it if they don't want to be perceived as weak. “

And

“They look weak”

And that proved to be the setup for a good short. Later on, I posted again and said that I was pondering a play on the long side provided 1040 low would hold.

I said:

“I doubt it 1040 fails today, but who care what I think or doubt?

If the low holds, that would, IMO, give a rather solid floor for tradable position on the long side, as cut-off risk becomes very well defined and easily hedgable on any advance -- something for me to ponder”

Why not? I just had made a good short, and could roll a bit of what I’d made into a gamble on the long side.

Well, 1045 was the low of the day, index did a 5-6 point bounce and market close.

Now, bulls have a situation where they can claim a retest of another test of multiple tests of 1040, as comical as it may sound, and declare a bottom. Why do they need so many test?

They can then parade bubble-visions and sing the praises of a still-intact recovery and maybe they finally get a squeeze.

Tomorrow’s GDP, and Bernanke, and, who knows? Maybe they finally get real squeeze party.

This is the 5-min chart at the close


The whole thing looks like a bunch of ABCs to me. It may drop a bit more and turn up. It may also rush down and morph the down side structure into a 1-2-i-…

So, yesterday’s low is important, I guess, and that’s what everybody’s watching.

Weekly chart looks really bad


Tomorrow’s the end of the week and a final chance for the bulls to redeem the index for the week and, at least, keep it in a more neutral posture.

Daily chart looks equally dismal


We have a third hit on the dashed purple parallel. It may be the retest. If I were a bull, I would not want too many hits on support. I would ideally want a hard bounce to squeeze some juice out of shorts.

Breadth started positive but deteriorated into close


As I have said, it takes more than just a bounce off support to improve broader breadth conditions like we see in the chart below


After just one day of somewhat positive activity, ARMS hit another high number


I get a sense that there are longs who just sell when they get a chance. If I am right, and if index does not do a massive squeeze bonanza, we may get in a situation when a real high number on ARMS may be needed to wash out enough sellers for some sort of a lasting bottom.

This is a 60-min chart


Notice RSI couldn’t make it deep into overbought but had no problem getting oversold.

Index needs a move above 1060 to perhaps suggest a change in short term trend.

Not much else to say. It seems like the world is awaiting life-defining events like some spiel by Bernanke and the GDP number. So, we sign off, and, however absurd, await those events.

OEW pivot support at 1041 and 1032. Pivot resistance at 1058 and 1090.

Long term trend is up. Mid-term trend is up. Short term trend is down.

Have a Nice Evening!