Last night, $SPX retested the neckline of the large head and shoulders pattern and is failing quite badly. In English, people see this negative pattern and are trading it. The downside target is 1150.
Any move to that level could happen quickly…as in one or two days. Reason: The 10-day moving average of TRIN (ARMS Index), a statistic of buying and selling, pressure is still within its normal range and nowhere near levels seen during the 2010 Greece scare. So, while there have been some TRIN readings lately above 4 that suggest very strong selling, the rest of the time TRIN has showed dip buyers have been active.
Net-Net: People have may be buying the dip on the valuation story. If these people exit at the same time that trend following machines flip from long to short…and then mutual funds raise cash…you have a recipe for selling pressure that could create a liquidity vacuum. I admit that is a lot of “if’s,” but I don’t think you can just dismiss the scenario. Desk flow concurs with the technician - Yesterday buyers of dips on fundamentals, today, towels starting to be thrown in. Buyers of dips on fundamentals, today, towels starting to be thrown in.
Any move to that level could happen quickly…as in one or two days. Reason: The 10-day moving average of TRIN (ARMS Index), a statistic of buying and selling, pressure is still within its normal range and nowhere near levels seen during the 2010 Greece scare. So, while there have been some TRIN readings lately above 4 that suggest very strong selling, the rest of the time TRIN has showed dip buyers have been active.
Net-Net: People have may be buying the dip on the valuation story. If these people exit at the same time that trend following machines flip from long to short…and then mutual funds raise cash…you have a recipe for selling pressure that could create a liquidity vacuum. I admit that is a lot of “if’s,” but I don’t think you can just dismiss the scenario. Desk flow concurs with the technician - Yesterday buyers of dips on fundamentals, today, towels starting to be thrown in. Buyers of dips on fundamentals, today, towels starting to be thrown in.
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