We're hanging on by a thread. As last week started, the Biotech Holders Trust (BBH) stubbornly refused to buckle in the face of pressure from the rest of the tech sector. It finally relented and fell 5% for the week and closed in on its 200-hour moving average. This particular wave still can elect slightly lower prices. In addition to all of the smaller calculations we discussed two weeks ago, the BBH finally put in a large black candle 61 weeks off its November 2005 top. In the near term, the problem going forward is the gap down on Friday, which will now act as resistance to 193 (closed at 190.50).
I was also looking for a bounce to start the past week. Except for a double bottom in the Nasdaq E-mini on Tuesday, we did get that bounce. Those of you who read the evening e-mail updates will remember I suggested that perfect double bottoms have a tendency to create excellent short-term trades. This trade on the long side did materialize on Wednesday, but as stated here last week there was an excellent chance we would flame out by the middle of the week. Our high for the week came in Thursday's first hour of trade. By Friday, we set new lows for the week in all of the indices I cover except for the SOX.
At this time last week, we were sitting right near important trendlines and moving averages. Right now, we are sitting just below them in the Nasdaq, just above the trend channel in the NDX but still below the 200-hour moving average. The Dow and S&P 500 are actually sitting right on their 200-hour moving average. The SOX is still below it at 468. In terms of the put/call ratio, we saw a normal acceleration up to 1.20 during the slide, which indicates a healthy respect for the drop did take place, perhaps too much. The fact that we did get to 1.20 so quickly suggests this correction may be short. By Friday, it dropped below 1.00 again on a day that ended near break even. This suggests there is a sentiment to attempt to buy the dip. This back and forth action could be indicative of a larger sideways consolidation.
The hourly candles suggest a low is possibly forming, as there was a tweezers reversal formation in the Dow and S&P 500 with support holding at 2426 in the Nasdaq. Things looked improved just about everywhere unless you were following the Nasdaq E-mini. Friday was a day that was all over the map. This index sold off sharply into the close, which is never a bullish omen. Since it is the Nasdaq E-mini, which leads the NDX, which leads the market, the fact this chart sold off so late in the day was overlooked by many. The only silver lining in the E-mini was it stopped going down at intraday support levels. The big concern is did it stop going down only because we ran out of time?
But here I stick to my discipline and coming into the new week, I see a SOX that failed to confirm any of the lows set on Friday. The internal wave calculations for the SOX bounce last week also looks more bullish than bearish even though it is below most of its important moving averages and retracement levels. For the rest of the market, when averages fall below important trend channel lines, they will make a strong effort to retest them. They can stubbornly retest two or three times on an intraday basis. Of course, they will either finally break above or fall away. We are beginning that process right here. To start the week, trading might be tight but since we have not fallen away from any support levels, yet I still give this long-winded uptrend the benefit of the doubt.
Jeff Greenblatt
Fibonacciman@aol.com
