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A Good Top

In my short trading career, I haven’t seen too many good tops.

We had one today.

That break above the previous all time high at $2480, then selling
right back through that level…good top. Expectation would be at
minimum to retrace through that top range, which is only down to $2460.

When you zoom out, you can see how we’ve stepped up, through
a series of ranges, since Trump. Each of those is a target. If this is
a bigger time frame top, and we retrace some of the Trump move,
we’d expect to walk down those steps, like a slinky.

A third zoom out gives us the huge support level, around $2036.

Other clues, to name just a few.

Dow had been on a historic run of all time highs, while the small
cap Russel had failed to make any new highs. The Dow was leading,
which I don’t think has ever happened before, to that extent.

The Dow made the same reversal. The Russel was falling.
The Nasdaq made a perfectly technical
turn, having exactly filled a gap down from it’s last all time high.

The internals were anemic (as they have been, increasingly, on each
successive all time high.)

We are in August, climbing to all time highs, when seasonally, we are
usually flat to weak. We are way over due for at least some kind of
correction.

There is the larger headwind of the promised accelerating Fed tightening.

None of this gives a clue about how big the pull back might be.
The tradition for quite a while has been “buy all pullbacks.)

We’ll see how things act, as the slinky hits each of those successive
ranges/steps.

8-9-17 update

Pretty perfect opposing tails.

Taken together, the two days
are like a big doji.

I still have the sense it’s running
out of steam…each rally is
smaller.

But that 2500 # is a psychological
magnet. And the Nasdaq came
a tick away from 6000.

Update, day 3

And…there’s the delayed follow through.

I don’t think I’ve ever seen negative 71k selling ES futures.

This is not likely to bounce easily. If it does, I’d say “short pops.”

This is not investment advise, just my habitual market narration.
Gloom can easily change to bloom, especially depending on your
time horizon.  But that is actual selling, imo.

I told you, good tops are hard to come by these days. That one
wasn’t perfect, but better than we’ve had for a long time.

Review

I sent a message to a friend within minutes of the top, just
so I’d have a record of calling it.

——–  Message ——–

Subject: blow off top
Date: Tue, 8 Aug 2017 10:37:28 -0700
From: Kelly Evans <Kelly@xxx.com>
To: xxx

 

markets might be topping here on a bigger time frame...
let's see how the day ends.

I’ll give some details about why I was seeing that.

SP500

I put a small blue circle on the SP500 futures chart to
show where I made the call.

As you can see, we had a breakout above the previous
all time high, and then it came back through that level
pretty quickly…that was one of many clues.

Internals

Next, a snap shot of the internals. I put a small blue
circle on how the NYSE tick plunged right at that moment.
The up vs down volume ($ADD) of the market went red.

The market has made new tops on weaker and weaker
internals, but up until now, those tops held, so it was
several things in context.

Nasdaq

I was even more focused on the Nasdaq that day.
See how it perfectly filled the gap from a few days
earlier?

Gap rules are, gaps are likely to be filled. And the
way they are likely to be filled, first price will often
trade only halfway through them. Later, it goes all
the way through. And then, later, price should go
through the gap in the other direction.

In the NQ, you can see that price sliced through
that gap days ago, on that big red washout, in the
down direction. But that gap wasn’t finished,
until it traded up through it from below.

The fact that it perfectly filled that gap from below,
then dropped, meant that, technically, we could
be topping…there was no technical reason any more
to revisit these highs.

Dow

The Dow had been in the news lately, for making
a series of new highs, 13 in a row I think, while
none of the other indices were. I think it was the
second most all time highs in history for the Dow,
and the only time it ever diverged from the SP500
like that.

Here’s the picture of that Dow that day.


The blue circle, at the moment I sent the email,
just punched back in to the range of the day before.
Plus, the way it popped above it that day was a
bigger wave, at the top, after it climbed on a
series of days with no waves.

RUT

The small caps normally lead, and are a good
indicator to watch for clues about what the large
cap indices may do next.

What was the Russel index doing at the time?
It was nowhere near it’s all time highs.

 

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