Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Tuesday, October 8, 2013

Selling Intensifies

Stock Market Technical Analysis Blog

click on image to enlarge

In the market today we had a serious sell off that has brought the S&P to a major decision point tonight - the lower line of its summer channel as seen in the top cluster, chart 4.  Also, in the top cluster, the SPY is down to its 100 day EMA, the dividing line between midterm bullish and midterm bearish market conditions shown in chart 3.  It is important that they defend the lower channel line and the 100 EMA line tomorrow because a meaningful break of those two will likely send the market into a spiral for a few days.  I was looking for them to bring out some sort of positive Washington development yesterday or today that they could use to start a short squeeze but nothing was ever offered.  After hours, however, a Yellen appointment was leaked and they juiced the Futures up about 10 points quickly.  Her appointment was something the market was already assuming and in itself would be a lame cut and paste news for a short squeeze but since there are no other positive developments out at this hour anyway, it looks like this is what they are going to use to try to start a short squeeze tomorrow.  The sustainability of a short squeeze off this type of news is questionable.

Looking at the middle chart cluster, we see the S&P broke through another major diagonal support line today and also the VIX popped into the really steep blue channel that can easily wreak havoc on the market.  These are both big reasons why they must play their cards for starting a short squeeze tomorrow even though they don't have the right ammunition.

Looking at the bottom chart cluster, the upper chart is the long term chart of the S&P which really makes it clear the size of the bubble they have pumped up in recent months as the S&P could fall a full 300 points and still be in its very bullish long term uphill black line channel. Also below that chart is a longterm chart of the VIX showing an alternate long term major channel.

Trade well my friends