Finally! Market Down in a Big Way...

The misleading market behavior that I have been discussing for some time now is finally beginning to reveal itself. The fallacy is that the markets have continued to "rally", to make new highs, to be bullish, to be strong... The underlying suspicion of the validity of this farce is in the volume by which the markets have been bought up. It has been low, suggesting there has not been the participation necessary to give it strength. The best way to drive this point home is to simply look at what happened today. The last time we had a similar sell off in the markets was October 30th of last year. It was no coincidence that it was also the last time the SPY traded more than 300 million shares in a day... One important difference between the last time we had a day like this (Oct 30), it came at the end of a retracement. This time it comes at a market top, suggesting there may be more downward movement to come. When I say more downward movement, I am not speaking on an intra-day basis, I mean in the weeks to come. I say this because tomorrow we could see a bounce upwards.

I said earlier in the week, the daily and weekly charts were suggesting a potential weakening market and if we got consecutive candle closes below the trend, the market could sell-off. Well, we got three consecutive candles below the trend, two of them closing below it (see red circle on daily chart below). This also happened to be the first time it occurred since the rally began in March. That third consecutive candle was yesterday. What happened today? The market crashed! The signs were also evident in the weekly chart as this week marked the first weekly candle that moved below the trend. 

SPY Daily Chart Showing Three Consecutive Candles Below the Up-Trend followed by Massive Sell-Off

SPY Weekly Chart Showing the First Candle to Trade Below the Up-Trend Coincides With the Market Sell-Off


With today's close below $112 on the SPY, I can officially say that the bears have claimed control of this market... Though I can only confirm the bearish bias is for the short term, I do believe the market has a significant correction to make and I think the bears will be in control for a while. That is not to say we won't see positive gains over short time frames in this market, but what it looks like now is that we have officially formed a market top at $115.14 on the SPY. We should see lower lows and lower highs in the coming weeks and possibly months.