I have to say today was a tough day. The indices pretty much destroyed all of my wave counts as the dollar tested its low after the G20 meeting sending the indices to test their highs on super light volume. To be honest, I'm not sure where I stand on a wave count now as price action continues to overlap but appears poised to put in a higher high. But here is what I can say:
- the fact that each of the four sell offs has been bigger (in terms of points) then the previous correction is a sign of weakness not strength as the bulls only step into buy once the index has fallen further than the previous sell off.
- we have a serious disconnect right now across many different sectors (see xlf (financials), xle (energy), xlv (healthcare), and xlk (technology) charts) as the Healthcare sector hit a new high today but the financials haven't even retraced 61% yet. This will be resolved in either a non confirmation high and a collapse, or sector rotation and strength in the lagging indices (mainly xlf, xle, and the small caps).
- The USD is sitting at the 786 retracement from the huge run it had from 10/07 to 3/09. After moving off of the retracement it is back again. It should move hard from here (give or take a day or two) and the direction it moves will determine the stock market's direction.
- Gold did not have a bullish close (implications for the USD?), so it will be interesting to see if there is follow through tomorrow.
- Volume was super light on the S&P e-minis today. A close below today's open on higher volume would be a very strong reversal signal and the confirmation of a low-volume test of a major top.
From here, the bulls need to see continuation tomorrow on stronger volume. A close above 1128 would give the bulls the strength they need to keep the bull train going likely through the end of the year.
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