Coolhand's Market Analysis

The generally supportive nature of OPEX week has been anything but supportive for stock prices this week. For third straight trading day the market has dropped relatively hard.

Of course the financial crisis in the EU continues to be fingered as the reason for the sell off as media reports and opinion pieces continue to paint a bearish picture of the situation.

Such negativity often breeds bearish sentiment, but technical indicators have not been hands down bearish overall.

Although that may be changing. And if so I would think it would accompany an increase bearishness, which could help set up a reversal.

I hadn't brought it up in recent blogs, but it's been widely reported in the press that the euro is under intense downside pressure. Today it found some measure of stability, but still ended the day down another 0.4%.



And commodities are also seeing selling pressure. The CRB index was down 3.4% today, with gold dropping 4.6% to end the day at 1587.70 per ounce, while silver fell a whopping 7.6%. Oil is also seeing significant downside pressure and was off 5.2% on the day to settle at 94.95 per barrel.

Interestingly, the financial sector only declined 0.3% today.

And as the stock market has been getting hammered, treasuries are extending gains as safety plays have become a primary objective, albeit a short term one so far.

Here's today's charts:



Momentum continues to build to the downside as indicated by NAMO and NYMO. Both signals are moderately negative now and remain in sell conditions.



NAHL and NYHL also moved lower and remain on sells.



TRIN actually fell a bit, crossing back through its 13 day EMA, which flips it back to a buy. TRINQ spiked higher and remains on a sell, but is highly suggestive of an oversold market, which often means at least a short term reversal. Taken together, both signals tell me a bounce is very near.



BPCOMPQ fell a bit more today, but remains in a buy condition.

So the signals are mixed again, but the system officially remains in a sell condition.

While this market has not exactly fallen apart, the action is getting worrisome. And that may be a good thing if we're to see an end-of-year rally.

I had anticipated OPEX week would provide some degree of support for this market, but as I stated earlier that has not been the case. We do have a good set up for at least a short term reversal, but I'm not sure how much retracement we could expect or how far it might go (assuming we get a bounce). Given market rhetoric continues to paint an increasingly bearish picture I would think that would translate into support for this market. By that I mean if enough traders and investors move to the bearish camp another rally could materialize.

Fundamentally, that seems like a very risky bet if one listens to the media. And that's probably what the smart money wants us to think. I remain 100% S fund, but not particularly comfortable by any means.