Climate Check August 10

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  • on August 10th, 2011

Finally, after breaking lower on July 28, my breadth stats have at least stopped going down.  While I totally underestimated the message of that evidence, it did its job by staying steadfastly negative since.  It’s still negative, but the momentum of the drop has come to a halt…gotta start somewhere, right?  Today’s evidence as we approach the final hour reads as follows:

The biggest difference is on a qualitative level.  I’ve yet to see a stock emerge as a bullish candidate to consider other than $SINA. but the supply of short candidates totally stopped into Monday’s drop.  Why?  Because I have a risk:reward filter in place incorporating “Distance from 10 Wk Average”.  Combine those extremes with the fact that average true ranges have exploded, and the well ran dry of shorts to consider.  I wasn’t considering them anyway at this stage, just noting what the truly objective measures showed me.

So, the numbers are off-the-charts negative, but at least now have the potential to form lows and setup for the next move.  We may get out of today without a lower low on $SPY for the 1st time in 13 days(July 22)…moral victory but a subtle sign of receding downside momentum.  We can also now count 3 days of action in which we’ve touched every $SPX price between 1125 & 1160.  Our best hope is to spend some quiet time in this area, wear down the amazing bear power, and retrace some of the losses.  I’ll watch $SINA as a simple tell…with a big short position & earnings next week, if it can’t push through the Livermore Level of $100 then I doubt any other stock has the ability to overcome the bears either.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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