Only One Accumulation Day, Need Two

Trader Talk

The major stock indexes traded back and forth the unchanged level once again today, with modest gains going into the close run on higher volume. Officially, the NASDAQ advanced 1% on 2.8% billion shares, while the Dow Industrials rose 0.3% on NYSE volume of 6.5 billion. The leadership profile remains negative, with 133 stocks making new highs versus 187 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The overall pattern remains solidly bearish, and today's action changes nothing in that regards. Both the S&P500 and Dow Industrials smashed below their March lows a few weeks ago - in five waves - and have now rallied back to that former support level in three waves, which suggests that current levels should provide formidable resistance to any attempts at continuing the advance, and thus lower prices lay ahead. We are trend followers who follow the big picture based on historical cycles and signals from major technical indicators, and all of that continues to suggest our bearish view is correct no matter the amount of intra-day, daily, weekly, or monthly volatility.

We experienced one 2%+ mega volume accumulation day advance late last week, and the bulls are dead in the water so long as such rally days land in singular form, rather than the double follow-through variety that signals a change in trend is in progress. Breakdown followed by pullbacks is the normal fare of bear markets, and the current technical set-up suggests that is what we have been experiencing over the past week or so.

Kevin Wilde, Chief Trading Strategist AlphaKing.com.
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