Very Early Stage
Yesterdays market action in stocks has set in place the first sell off since late last November. Until yesterday 90 percent of the computer direction signals have stayed bullish since the September 1 to 9th base based on the Fed’s QE2 announcement. Yesterday some signals turned bearish but the important thing is that 80 percent of the time period based systems are still bullish. What that means is that while the change is significant, most market players view the current situation as a short-term sell off and are looking to be buyers at some level. It will take a much bigger breakdown of these trend periods to unleash significant selling.
We still maintain that this will be a trading range year and the highs of the year are in place for stocks and most if not all commodities. At the moment the support level on the S&P 500 is in the 1215 area, down around 9 to 10 percent from the recent highs.