Special alert: A line in the sand

The market is now exhibiting something it hasn't exhibited for quite some time: a willingness to sell. The market has gone the longest time in history without a 10% correction. My last Special Alert (July 17) clearly said, "My view is that the market is set to turn right away. With the date this Thursday…” as you may recall, Thursday was July 19, the turn date specifically mentioned in my Special Alert. It was the day of the high and the only day the Dow Jones Industrials have ever closed above 14,000.

The market has been hitting trend lines with consistency. For the first time in a long while, selling is coming into the market with apparent ease. What is a bit alarming is that TRIN, the traders index, had been below 1.00 (normally bullish) for much of this morning. On a day like today when declines are over 11 times advances, one would expect TRIN to be at least 3.0, if not much higher.

Whether this translates to complacency or the Plunge Protection Team, etc., I don't know. What it means is that a lot more selling could happen if it really wants to. The bullish side is that it is deeply oversold and A/D extremes are usually good buy points. Remember, crashes come from lows, not highs.

The chart shows we have reached the bottom of the channel. If this line does not hold, the odds are strong that some serious selling will come in. The market is oversold, but it is also emotional. Watch that line carefully. I have put in the Fibonacci retracement lines, as they are the next areas of logical support if the market breaks.

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