General Market Updates

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I'm not sure exactly what happened today or what the "low" was. I'm sure some of you have read stories and know more than I do. Anyway, this is the type of thing to expect at the beginning of a major new pattern. For this reason, I would view the current highs of 1220ish as a very significant top. Of course I don't have a crystal ball, but that is my take.

Also, realize that the move down off a top will happen fast. But then it will lazily retrace the decline in much more time. So don't be surprised if soon (even now) the market finds some flooring and consolidates back up for several weeks. It's not that I am necessarily expecting that just yet, but that is the nature of these types of things.

If today's low was as low as the quotes come in at 1066ish, then this is easily the largest and fastest decline in some time, and basically confirms the start of a new pattern (down or sideways) as far as I am concerned. If the low is actually around 1085, it is still the largest fastest correction since March 2009 bear market lows. The E-mini futures show a low around 1056 which is a huge intraday loss.

The boxes on the chart above are the same size as some important declines to gauge this one against. Basically if the market makes a similar decline to January 2008 (the dark blue box), I think we can infer that a major correction or bear market is in effect.

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While I don't know how much to read into it, the trend break (lower high and now lower low) in the Shanghai Dow may have something to do with the program trading "crash" today. Whether it does or not, the Chinese market has been leading ours at turns for the last couple years, so maybe this is a clue that a new downtrend is in effect.

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Even if a new downtrend is in effect, we should probably expect a big bounce soon. The McClellan Oscillator hit a very low level today. Most often though, it seems that there is a retest or even lower low, that creates some divergence before a more lasting corrective low.

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Continued strength in the US dollar has corresponded with declining commodity prices. I had suspected that a rising wedge/triangle was forming for the last few weeks in this index, but wanted to wait for some confirmation to post it. Basically, I expect the thrust down from that wedge to go to Feb low pretty quickly. And based on common time relations, I would expect the downtrend to continue to late June or early July for this leg down.

Gold is not following the commodity indexes, and is acting like a crisis hedge as mentioned in the last post. If it makes new all time highs, it could be in a real nice bullish position. I don't have a ton to offer on gold, but I would really be looking at still playing this from the long side if at all.