The reason we bring up these comparisons now is that the stock market has exhibited the tendencies of both “airplanes” and scuba divers” over the past several months. Following the May highs (1370.58—S&P 500), downside pressure was definitely in play until early August. Heavy volume caused a remarkable negative break in our Cumulative Volume (CV) series as reflected in the S&P 500 and the S&P Emini futures contract. Longs were hit hard and scuba divers profited.
Daily S & P 500 Index with Cumulative Volume
Weekly S & P 500 Index with Cumulative Volume
Following the August lows and a modest reflex rally, prices sold down to new lows the first week of October. The S&P 500 exceeded its August low at 1101.54 by declining to a new low at 1074.77. But that second low turned out to be a draw play. Some would call it a “delayed ending” or a “hook” in that those new lows were not confirmed by short-term Momentum AND the market on the Minor Cycle was deeply “Oversold.” In other words, the scuba diver was exhausted and water pressure, buyers, prevailed to reverse the trend to the upside.