one thing that i try to do is to avoid posting much when there’s not a lot to say, at least anything that hasn’t been said here in the last few weeks to months: i still do not believe that the risk to reward favors being long this market. i am speaking more to the longer-term investors and swing traders although i still believe the near-term bias is bearish as well.
from a longer-term perspective, i have made the case both fundamentally and technically, based largely on the daily and weekly time frames, that quite a few extreme levels such as overbought readings, sentiment surveys, etc… had all reached very rare levels that almost, if not always, preceded significant corrections and/or market tops. one could argue that the recent correction from the highs, in both time and price, has been sufficient enough to relieve those extreme conditions but a quick glance at the market action following similar junctures in the market suggests that is highly unlikely. add to that the fact that we are finally seeing the market leading stocks break down one by one and the case for a more lasting downtrend is even stronger now than it was a few weeks ago.
shorter-term, one could argue that since the SPY & QQQ did penetrate below the bottom of that trading range that i highlighted last week and was able to get back above that level without the markets cascading lower was very bullish. i won’t argue that point very hard although i do have a different take on last week’s market action and the fact that the markets were able to hold up after making a new low. from my experience, when a well-watched technical support level like that is broken and quickly regained, especially after a period of several weeks of consolidation, that usually proves to be a bear-trap and the launch of a powerful rally which it clearly has not been so far. zooming out to a slightly longer time-frame, the SPY did not break any support, yet, but on tuesday tagged that key support level shown on my last couple of daily charts and bounced off that level for the rest of the week.
therefore, neither side, bull or bears, have yet to declare victory in the short-term but personally i think it would take one heck of a mega-rally this week to undo all the bearish technicals on the weekly charts that have now firmly set in (trendline breaks, bearish macd cross-overs, oscillators rolling over, etc..). as such, my bias remains to downside and as i remain aggressively positioned as such, i will continue to look very hard for evidence that might prove me wrong.