I love tracking the general market. I do this because individual stocks trade in line with the market at a rate of 4 to 1. Putting those odds in your favor is a very good thing when it comes to your bottom line. Some traders ignore it altogether. To that I say, good for them. Have at it. It takes all styles to make a market and mine is but one.
Over the last few days I feel that the market is telling us something very important. That could easily change going forward (you have to stay nimble) but right now it’s telling me: lower prices ahead.
With the markets gapping down severely this morning, with the Russell 2000 gapping down a full -2%, I believe they’re worth listening to.
Let’s take a look at the charts:
Here you can see a big trend line break earlier in the week on the hourly chart and now a huge gap down. That’s nothing to be ignored. Right now I’m watching to see if the gap faders will step in and hold this baby up. So far it does not look good.
On the daily you can see the market failed at the March highs and has pulled back considerably and is now right on the daily 50 MA — which it needs to hold for the bulls.
This is the chart that’s really making me think. Look at those high volume weekly bars on the down moves. Clearly they are standing out as higher than any surrounding green bars.
To me that says WATCHOUTNOW! And I will be remaining very cautious.
Good luck out there.