Thursday, 25 October 2012

Daily Index Cycle update

The market opened higher, but it sure didn't close that way. Despite battling all day, the bulls failed to hold the moderate gains and the market closed a little lower - although the transports suffered massively after NSC earnings.


Nasdaq Composite



SP'daily5



Transports


Summary

The tech sector is struggling to hold the 200 day MA, and a break/close below looks very viable for Thursday. This suggests to me that the sp' will also have a chance at breaking lower to sp'1375.

The daily MACD (blue bar histogram) cycle on most of the indexes is getting pretty low (except for the transports which is warning of a snap lower tomorrow/Friday). So, there is a real threat of a multi-day bounce, not least if we can fall a few more percent before the weekend.


Holding overnight

I remain short, and seeking an exit 1395/1400 tomorrow morning. However, there is a very significant risk of a major gap lower - much like Tuesday, that could see the market drop as low as sp'1375, before a latter day bounce.

I continue to look towards Q3 GDP (to be released Friday morning) as a critical data point. If Mr Market decides it needs to price in a 'likely' US recession (even without the fiscal cliff issue), then a brief snap move to sp'1325/00 seems viable...within the very near term....as in 'days'.

A little more later.