Is The Bloodbath Over?

 We are now in a pretty interesting position: a support level near the 200dma (and it will be at the 200dma withing a few days), a cluster of blue Elder impulse bars, and finally an up day (marginally) after a sizeable morning drop. We may be in for a pretty decent rally, and my best guess for the target is the top horizontal line.  Volume is increasing, so we may be seeing the dip buyers coming back, and another increase in volume tomorrow could well give us a follow through day. In any case, I suspect that the nasty down draft we have been in is over for the time being. 

 We have not yet retested the low on the Nasdaq, and we may not. Price relative here has turned more or less neutral, so, here too, the indications are that the sell off has, at least temporarily, stopped. If we get a green bar tomorrow, it is a buy signal, but we need to be aware that it could be a false signal, such as the last green bar we got here.

The NYSE composite has the double wahmmy of breaking the 200dma, then rising back to it only to fail. This still could be a bottom, and if this gives a buy signal I will be looking to buy, but ready to bail out if it turns out to be false.

Here are the sectors ranked by RSI. Last weeek we had 5 sectors under 30 (“oversold”); this week there are none.

XLU is still at the top, but the price relative line is no longer rising and may be about to reverse. If that happens, it probably means a rally is coming, and it will last about as long as this drops.

XLF has slipped into last place, thanks mainly to nice bounces in XLE and XLB. Watch for this to flash a buy signal: if we break above 14.24, I think we are in for a move up, probbaly to at least the top horizontal line. By that time the 50dma should move down to meet it, and that will likely be the first resistance. If it doesn’t break above 14.24, then we are probably in for another move down.

We may be in for a rally, probably a fairly weak one that doesn’t come close to the old highs, but it should be quite tradeable. We don’t have the confirmation yet, and could very well fail here, but it won’t hurt to be prepared. I will be looking for long positions tomorrow.

I will have the new highs update shortly.