Gary Dean, on the Strong Case for the Bears (MarketsPath.com)
Volatility is back baby!! Now we have to see if the puppet masters allow it to stay.
We had another support/resistance tag from last night's update hit today. For our premium members, I even lowered the 1000 support pivot to 995 before the bell. The 1027 level was tested in early trading, with a high of 1028 before the bears stepped in and decided to show some muscles and drove the SPX to the 995 pivot. That is a pretty volatile day, I would say.
The bears are starting to build a pretty good case for stamping P2 (primary upwave 2) complete as of last Friday. The jury hasn't come up with a unanimous decision yet, but they are getting tired of sitting in the jury room. The last piece of evidence they will need in order to be unanimous that 1039 was the top of P2 is an SPX break of 975.
The "bull market is still alive and well" defense team (puppet masters) has some insiders in the jury room and knows very well that the 975 number is a key to winning their case. If they fail to hold that level, the bears will have full control of the tape and P3 down will be the roadmap of choice.
Until that level is breached, the bulls still have the ball in their court.
For Wednesday: If we see early weakness, watch the 992-991 area to provide support. If that fails, 980 may come into play. The bears will try and defend the 1001-1007 pivot zone and then 1015ish.
Jack Steiman, on Holding the Critical 976 Bottom (SwingTradeOnline.com)
What we need to do after a day such as Tuesday is to study things technically. What type of reversals took place and on what type of volume? Was the volume light or heavy? Was the reversal sharp or thin? Are the oscillators in much better shape after we see a day of such hard selling?
Volume was very strong on the reversal. Far stronger than anyone would have thought possible on the first day of September, which is normally a very light volume this time of the year. Bad news for the bulls. The reversal was sharp. Just to give you an idea, we saw the leading sector off the lows, the financials, get annihilated on the reversal to the tune of nearly 11% on the Ultra Financials Pro (UYG) ETF. Losses were similar on other ETFs for the sector. The leader, Goldman Sachs Group Inc. (GS), got crushed on the reversal. American International Group (AIG) annihilated. And on and on it goes.
That sector took it hardest Tuesday and that's yet another major red flag. However, the reversal was everywhere. Just look at the advance-decline line. At 10am eastern time, when the market was rocking up on the ISM number, the advance decline line was very green. At the close today, a slaughter. 4/1 down on the NYSE and 3.5 to 1 down on the Nasdaq 100. Transports, retail, housing and just about everything else was crushed on the reversal from a percentage perspective and all on big volume.
The reversal was also strong enough to take out 1007 on the S&P 500 and 1990 on the Nasdaq 100, or the 20-day exponential moving averages. Gaps and 20's taken out in one day. Nasty and not what you normally see if things are healthy in the market. The oscillators actually worsened today. The MCAD's are now pointing straight down as are the stochastics. Both are still elevated.
Negative fast line crosses have been made. The fast lines are now below the slow lines and leading down. Not good. Bottom line today was bearish. Nothing bullish from the action. I'll talk later about where we are overall.
So is this market dead?
No. It has a lot more work to do even with today's action. The Nasdaq 100 and the S&P 500 would have to lose their 50-day exponential moving averages for that to be the case. Below that, the S&P 500 would also have that neckline of support at 956. However, it would be bearish to lose those 50-day exponential moving averages and those levels are at 976 on the S&P 500 and 1930 on the Nasdaq 100. You can expect a strong bounce off those 50's folks. Markets rarely lose all of the support it did today, get down to the 50's and just melt below.
Normally, even if we're transitioning to a bear market, you should expect at least a decent bounce off the 50's that'll get everyone bullish again. It'll move up and make a lower high and then roll over again if we're headed to that bear again. That's when it gets interesting. The type of bounce off the 50's and how it rolls back down. A lot to learn from that for sure. Keep in mind that as bad as today looks, you still can't get terribly bearish unless those 50's go away. The bulls can make an excellent argument that it's normal at some point to go back down and test the 50's, and their right. However, the way we started it today should keep you on alert to not get too excited about a 50-day bounce to come unless it's special. I doubt it will be. You never know but today speaks against a very bullish outcome.
That 1025 S&P 500 gap down from yesterday was tested Tuesday (1028) but failed. This 1025 level now becomes massive resistance. We now have 1025 as a top and 976 as critical bottom support.
Which goes first folks is what this is all about. Please keep those two numbers beside your computer. My guess is, like I said, we hold the 976 level and bounce. Heaven help this market if the bounce is weak and reflexive.
Harry Boxer, on the UltraShort ETF Charts (TheTechTrader.com)
We had a very sharp pullback Tuesday, which may have triggered the beginning of a new downtrend. Certainly, the ultra shorts reacted positively, and I want to go over some of the big ones we follow just to give you an idea where they may be.
The Direxion Daily Large Cap Bear 3X Shares (BGZ) had a gap down with a little bit of a downtrend that started in early July that was broken Tuesday. It gained 1.68 on 13.7 million, the heaviest volume since early July. That was significant because it broke through lateral price resistance up through the 10 and 21-day moving averages and tagged the declining tops line going all the way back to the March high when the stock was 119.00, which indicates to me the possibility that it is breaking out here. We need to get a follow through. We've seen movement before but not with this kind of volume and not with that kind of thrust, from 23.82 to 26.15, closing at 26.02. The first target is around the 27.75 range up near the mid-Aug highs, which is also the declining moving average coming in at 20.25. So the zone between 27.41- 28.22 is going to be the initial resistance. Beyond that, if it does continue forward, key secondary resistance around 31.50 area would be my secondary target on BGZ.
Mike Paulenoff, on All Roads Pointing to Test of August Low (MPTrader.com)
Needless to say, Tuesday's powerful downside candle smashed through key support at 1013-1010 on the S&P 500, continued lower and closed right at the low of the session. Tuesday's candle is the most dominant entry on the SPX daily chart since early July and likely has just as much significance, but in the opposite direction. All roads point to a test of the August pivot low at 978.51, which also represents the coordinate of the rising exponential 50 DMA. Any recovery strength should find initial resistance at 1000-1005, and even stiffer resistance at 1010-1013. Only a climb above 1015 will neutralize the current very negative technical set-up.
