Coolhand's Market Analysis

Right off the bat I'll tell you that in spite of today's weakness the Seven Sentinels did not go to a sell condition. Most likely it's because Friday was a positive day and today's action wasn't as ugly as early trading seemed to suggest it would be. In fact, the broader market recouped about half its losses by the close.

I would have to view today's market performance as a net positive in spite of the negative close. It was only late last week that the Earthquake,Tsumani, and nuclear disaster hit Japan and the Nikkei had yet to trade since those events. When it did trade, all it did was drop more than 6% in its first full trading session. In response to this disaster, Japan's central bank announced plans to increase its asset purchase plan to 10 trillion yen from 5 trillion and make 15 trillion yen available for its banking system.

But other major Asian markets didn't follow Japan's lead and were actually up on the day.

In the eurozone, the major bourses initially fell hard, but it wasn't Japan's disaster that was to blame for the weakness, but a weekend vote by European officials to increase the bailout package for fiscally strained countries to 440 billion euros. At the end of the trading day many of the major bourses managed to significantly cut their early losses.

Oil prices resumed their recent weakness today, hitting losses of about 2% before rallying to close flat on the day. A barrel of oil in now just a bit above $101/barrel.

Here's today's charts:



NAMO and NYMO remained weak and continue to flash sells.



NAHL and NYHL also remain on sells.



TRIN and TRINQ are both flashing buys.



BPCOMPQ ticked lower still and is really looking bearish. It remains in a sell condition.

So 5 of 7 signals are flashing sells, but the system remains on a buy.

I find it very interesting that the Sentinels have not rolled over to a sell. I am inclined to see this as a positive for the market and would not be surprised if we are near a short term bottom at the very least. Our sentiment survey is also on a buy and that also supports my hunch. And then there's QE2.

So while we've had a good deal of weakness in recent weeks, it could be the Seven Sentinels see higher prices down the road. If that proves true then taking a moderate draw down from time to time may not necessarily be a bad thing. I certainly hope it plays out that way.