The State of the Trend
Two weeks ago, the conclusion was that market internals are oversold, and there should be a bounce in the context of broken monthly, weekly and daily uptrends.
This week, market internals are oversold once again,
and the SPY finds itself in the middle of a perfect bear flag:
Should the symmetrical movement of the index follow its natural course, we should expect a bounce in the vicinity of 114, or 1140 basis the SPX. A breakdown from the flag gives downward projection in the 980-1000 area.
Given the oversold nature of market breadth indicators, however, a short-term, countertrend bounce is not excluded. In which case, the 1185 level should be monitored closely for signs of sustained strength.
From a channel point of view, the three timeframes we follow (daily, weekly and monthly) show that the downward support zones have not been reached or breached yet:
Coming soon: the iPhone app is almost done, and will soon be submitted to Apple for review. Keep an eye on Twitter@citdates.