Update October 23rd, 2009

5:30pm

The market once again shows its mean side and I’m pretty tired of sounding like a broken record. Since I started getting really worried about this rally last Friday, the $SPX has only dropped 8pts, on a closing basis, and the $INDU is only down 21pts. So what’s the big deal? Look at the $TRAN, down more than 200pts since then thanks in part to disappointing earnings releases from CNI and now BNI. It was the $TRAN that signaled the last minor correction. The shippers got hit today, too. DSX, ESEA, EGLE, to name a few. Fertilizers, which have been pumped to the moon in the last several days, gave back a large part of those gains, especially AGU, but CF, POT, & MOS didn’t have such a great day, either.

The financial sector appears to have topped, and it did so on Wednesday, October 14th with, I think, GS’s earnings. All the biggies, JPM, GS, BAC, WFC, are under a lot of pressure and the XLF is already down about 4% since then. The $BKX is down even more, about 5.7%. This market cannot survive without the financials being front and center.

The $CYC, another very important index, at least to me, was down 1.5% today. The $SOX was down 3.2%, and the $RUT was down 2%. If it hadn’t been for MSFT’s and AMZN’s stellar reports, where might the sell-off have ended? And I wonder how long it’s going to take before the ether wears off and all those people who paid over $100 for AMZN come out of their daze and decide they better take profits before some other fool does.

We’ve had two distribution days this week: Wednesday & today. Based on what I expect to be some pretty serious signs of negative strength for the SG’s tonight, I think that we may get another major distribution day again next week.

But we’ll see. I still think there’s a chance we’ll go down and/or sideways for as many days as we came up off the October 2nd low. We may get a pull back more along the lines of the pull back that started in late June rather than the shorter term pull backs we’ve been getting since then.

I will up date the SG’s a bit later but I expect that I’ll be replacing ‘weakening’ with ‘strengthening’ is each status line.
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7:15pm

Negative strength continues to increase.

SG status for the $SPX:

Strengthening, confirmed, Phase IV sell signal.

The D Indicator has now hit bottom and should stay at this absolute low level until weakness wanes and strength comes into the market.
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SG status for the $COMPQ:

Strengthening, confirmed, Phase IV sell signal.

The D Indicator has plummeted out of minor bullish territory two days ago all the way to its absolute lowest reading.

Interesting that since last Friday, the $COMPQ is only down 2pts.
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News that Carl Icahn has left YHOO’s board appears to be having a negative impact on the stock.

Update October 20th, 2009

6:45pm

Almost all indicators reversed today canceling the weak ‘buy’ signals from
yesterday.

For the $SPX:

A: Down tick. I wouldn’t call this a negative sign of strength yet, but this is the most powerful down tick since October 5th.

B: Up tick but is showing a nearly complete loss of upside momentum.

C: Down tick. This had a bullish confirmation yesterday but has now reversed. I’m not surprised.

D: Down tick. This one had a down tick yesterday and has now rolled over.
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Current status for the $SPX SG then is:

Weak, confirmed, Phase III sell signal.
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For the $COMPQ:

A: Down tick. On a relative basis, this is a stronger signal than on the $SPX and so I’m taking it as a negative sign of strength.

B: Up tick, minuscule. Has almost come to a complete halt.

C: Down tick, minuscule. Was ready to have a bullish confirmation until today.

D: Up tick, minuscule. Looks to be getting ready to roll over.
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Current status for the $COMPQ SG is:

Weak, partially confirmed, Phase II sell signal.
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The bottom line is that the SG’s have been flashing warning signs for this entire rally leg and it appears that the market has finally begun to roll based on the weakness evident. Maybe tomorrow the market will rebound and have a positive sign of strength. Just have to see.

Small caps, Housing, REIT’s, Biotech, Regional banks, and Retail underperformed today, and the $CYC was under some pressure. Except for the $CYC, these are not major sectors but that’s how these declines start. CNI, the Canadian National Railroad, reported after the bell and is taking a hit. If this bleeds over into the other railroad stocks then there could be some pressure on the $TRAN tomorrow. CHRW, which is in the $TRAN, reported but I don’t see it trading AH so I don’t know how it’s being treated.