i’m sure CNBS will tag on some reason or another for the end of day rip but i’ve been trading and watching every tick in the markets long enough to know that the news almost always follows (or coincides) with the charts. this bounce was triggered by the EUR/USD perfectly kissing and then bouncing off that first support level (S1) on the previously posted 4 hr charts. we also had some of the key indexes bounce off their uptrend channels and when the volume in the markets is at extreme low levels like today, any amount of buying (or selling) can and usually does cause very fast rips like we had into the close, as the markets and the EUR/USD bounced off those support levels.
this uptrend reminds me of the movie “The Sixth Sense” where Bruce Willis’s character is shot and killed in the beginning of the movie yet his ghost walks amongst the living throughout the movie and doesn’t realize that he’s actually dead until near the end of the film (and it’s quite the shocker once he realizes that he’s actually dead). the markets will likely have the same reaction in the next few days as this over-extended rally is running on fumes and with an increasing amount of (but not yet all) indicators saying that it is already or almost over. here is a comprehensive look at the 60 min charts of nearly every broad index and as you can see, it’s a mixed bag with the SPY, NDX-E, and IWM on sell signals after breaking below their uptrend lines while the MDY (mid-caps), Nasdaq Composite and the AAPL heavy QQQ/NDX still managing to find support along their uptrend lines and remaining on buy signals for now. whether or not they can and will manage to hold the market up into options expiration (OPEX) on friday is yet to be seen but i’m favoring continued downside of the EUR/USD since that pattern breakdown last night and as posted earlier, i do not expect a very large bounce off the S1 level where it found support at the end of the equity trading session this afternoon. of course, i will monitor and adjust accordingly as this market is anything BUT a non-manipulated, natural supply and demand driven market over the last few years and manipulating currency prices are probably the single most effective way for global central banks to control equity prices.
