GROUND HOG DAY
Here we go again with the early morning weakness that has been evident often in this monster up move, it has typically been reversed into an up close by day's end.
I have projected on the screen what things would look like if today we close below yesterdays low, again it will require a minor miracle, but just for fun let's say it happens. After all the day most likely historically to have large down closes is Friday in the stock market, with Monday being the runner up. We once again have the 5 point megaphone pattern that has formed and as I have written about previously, these patterns are more significant when they occur after an extended market run like we have had here.
Along with that we have a 3 point divergence in the Pro Go Oscillator, a Long Time favorite indicator of mine created by Larry Williams. Again for the trade to be legit, we need a close under the prior days low not just an intraday penetration of it. Some times when I have used this I have entered intraday front running the close in case the market runs away from me, and just exited at the close for a loss if it does not close below the low. This time, I am going to wait due to the number of fakeouts we have had intraday during this run up here. There is really no reason to believe this market will top right here other than it is so incredibly extended by any measure to the upside, that a waterfall could happen at any moment. We have seen recently heavy commercial selling in the NAZ, which does tend to lead things. Also that index if you look at it vs the SP 500 is lagging considerably. This is not what we want to see in a up trend, and it is a warning sign that we are on thin air here.
We seem to be making an inordinate amount of V tops and bottoms in markets nowadays. I suspect this is due to electronic trading and it's influence on the markets. As a result we get moves like this from March that just go straight up with no retracements at all, hence no real support points to help when declines start. There is major resistance in the 1121 - 1154 area which are Fibonacci retracement targets. The first is 50% of the whole down move from 2007 and the latter is what we called an AB=CD leg which projects symmetry from the rally from March to June, then adds that to the minor low in July, and projects a completion of this leg at that level.
I am not a huge Fibonaccci fan simply because all they do is project numbers in space, but alot of the big boys on Wall Street watch these levels so at times they can become self fulfilling. If we keep going up and you have had the guts to stay long this whole time, take some money off the table in the 1120 area, unless you think we are heading to new all time highs.