I was traveling all week and returned late Thursday night. As I reviewed the development of price for the week in the Stock Indices and the structure of that development, I was extremely surprised. The S&P moved right into the 2125 area, but it did it on declining volume, declining breadth, the number of new lows exploding and declining volume increasing over advancing volume. In other words, a few tech stocks were carrying a speculative move in price development that was not being supported by the rest of the market. The structure of the move was weakening fast, leaving no other alternative but a move back down.
The importance of what occurred last week is significant. Unless the structure of the market strengthens early next week, I expect to see the S&P test 2030. That will be significant support. However, if that is broken, the continuing weakness of price structure will weigh on price development and there could be a substantial, sustained move lower. Keep in mind, the Indices have been in rotation and unable to breakout since February of this year. 2030 in the S&P is the lower extreme of that rotation. Trading and closing below that level suggests a greater degree timeframe is taking over that will lead to a greater move to the downside.
Markets never move in straight lines. They run and pause, then run and pause again in all degrees of time. Expect periodic pauses on any sustained move. How those pauses develop will be important to analyze in determining the continuation of any move.
The Metals were slammed this week. I have felt and stated many times I think the Metals may be reaching a point where we could see a significant move to the upside. I have not suggested long positions because I have expected a continuation of selling, but I am looking for a bottoming pattern. One possibility is the move lower this week could be a blow-off bottom. This occurs when sellers dump all positions and exhaust themselves. There is nothing left to sell and buyers begin to step in. If this is the case, we will know through an analysis of the structure of any move off of the lows. However, until that time, be wary of any long positions.
Oil appears to have much lower to go. Price development and the structure suggest a possible move down to the 33 – 34 area.
The coming week will be very important to the intermediate to longer term analysis.
This is the link to the full Briefing: The Markets in Development Briefing