Another Failed Rally Attempt

Monday’s market predictably opened on a very positive note presumably on the “peace” talks between Israel and the Hezbollah.  We call it a failed rally attempt.  Very simply there have been a few rally mornings during this month that are there for you all to see by looking and listening to the market.  Tonight we only have time to analyze one particular index, the NASDAQ 100 or NDX.  If you want to do some homework yourself, follow the link to the left for Big Charts and look at a 10-Day chart with 15 minute intervals for both the Dow (symbol: INDU) and SP500 (symbol: SPX).

Looking at any of these indexes you get basically the same pattern:  Going back to the jobs’ report on Friday August 4th, we see a higher opening and a big drop into the close.  Then there is the Wednesday August 9th trading day that started up big due to CSCO’s earnings.  And, now we have the “cease-fire” Monday August 14th early morning pop and subsequent selloff.  

Let’s focus on the NDX for those days.  August 4th, the high in the morning was 1530.04 (we thought it might be able to get to around 1550 but we now think this 1530 is going to be the full retracement).  August 9th, the high in the morning was 1517.90 about 12 points lower than August 4th.  Then there is Monday August 14th, the high was 1515.68, lower than both of the previous two early morning buying frenzies.  

You could make a good argument that the Sellers were the smartest of the bunch back on August 4th, not the buyers.  The second smartest were the sellers on August 9th with those that sold this Monday morning being a close third.  What were You doing?

We are extremely bearish especially after three reversal days in the last seven trading days.  These days are designed to force the early morning buyers to pay the highest prices of the day and by the end of That day they are already losing a substantial amount.  These days are not well understood by the early morning buyers who thought, whatever the news was, that this was the day that the bull market would resume.  As we have seen—if you haven’t seen, you should go look at the charts—prices are now trading below what they paid.  This is called a loss, something that doesn’t make sense in a true “start to the bull market”.  In tomorrow’s post we will explore the bearish possibilities for the coming six weeks or so (if you want a good preview, the True Contrarian has posted again, follow the link to the left).  We’ll see you back here tomorrow.    

[Editor’s note:  Please accept our apologies for not having a post up for Sunday evening.  The author had a pressing matter, which needed immediate attention, that came up early Sunday morning, taking him away from his normal routine for the past 36 hours.  Normally, advance warning would be given to you should a normal posting not be available on a given evening before a day when the market trades.  Unfortunately, that was not possible in this situation.  This has certainly impacted this evening’s post as well but tomorrow there will be a full posting.  Please come back for that as the market is turning very interesting right now.  Thank you for your understanding.]  

Dow Industrials:  11,097.87
QQQQ:  36.77
RYVNX:   24.01  (own)
RYAIX:  25.34
RYCWX:  43.51   (own)
TLT:  85.25   (own)
BEGBX:  13.49