Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Not much to add today versus what was said yesterday other than we had the first signs of emotional selling late in the afternoon yesterday. Breadth was horrid – even when the S&P 500 was only down 0.4% in the morning action, the advance decline line was near to 2000 which was a very strange situation – I guess Cisco masked a lot of the weakness in the indexes. The Russell 2000 was of course much weaker. Breadth ended with a -2400 type reading which is an extreme.
The % of stocks in the S&P 500 below the 50 day fell another 7% from the 29s to the 22s. The McClellan Oscillator for the NYSE sunk big time to mid 80s; it is now reaching extreme levels. Any substantial selling today would lead to a reading nearer to 100 which is a rare event.
The S&P 500 indeed did bear flag as suspected the previous few days – I did mention Monday sideways chop was the worse thing that could happen as it would indicate a bear flag and that’s how it played out. The 50% Fibonacci retracement of the June-September move is now broken and 61.8% is about 10 points lower from yesterday’s close. The S&P 500 did sit on its 50 WEEK moving average much of the session yesterday until giving up the ghost in the closing 90 minutes or so.
So all in all there are a lot of extreme levels here – but oversold can get more oversold (as we saw yesterday) …however, it’s now at the point where those short are pressing their luck in the very near term. But for a bounce either a catalyst needs to appear or sellers simply need to be exhausted. Of course futures are up as I type this rather than seeing a capitulation type premarket selloff. (nothing new there)
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