What a difference a day makes. Although my work still shows us in bull mode, as of today a yellow light is flashing. Two things are troubling. First, the Buy line on the Buy/Sell Vindicator is clearly diverging. Divergences can evaporate, but they are a caution sign. Adding to that caution sign is the fact that the V Stoch is flirting with overbought territory.
Secondly, on my preferred count we are in the beginning stages of a 3rd of a 3rd of a 3rd wave, which should have some power to it. Yes, we did have an up day, but on the NYSE total volume was lower than Monday and internal statistics were much weaker than Monday: Up/Down Volume ratio of 2.2/1 and Advances/Declines ratio of 2.9/1. Not very powerful or impressive, or rather impressive in a bearish fashion.
There is an alternate count best described by Daneric (http://danericselliottwaves.blogspot.com/) which may come into play here - it certainly deserves consideration. That count was discussed in last weekend's update, so I'll just post a current snapshot (daily ES chart):
On the Trend/Osc system, the up trend line was adjusted when new highs for the move were achieved today. That trend line is not very far below current prices. A break of that trend line accompanied by a reading below 80 on the Dyn Osc would generate a sell signal. Given the situation, it might be a significant sell signal.
Wednesday, August 4, 2010
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