The multi timeframes stages analysis can only confirm that the market is now in strong decline. The weekly score keeps plunging and accelerating in negative territory. There is no comparison with what happened in August 2010 when the correction only looked like a hesitant whipsaw from where the weekly score could easily return in positive territory in early September.
The weekly stages structure is now overwhelmingly dominated by 37.2% of all stocks in decline stages and 34.5% in the various distribution sub-stages.
This leaves us with only 28.3 % of stocks under weekly accumulation and mark-up stages. This percentage is equivalent to the one seen in August 2010, but the big difference, as shown by the weekly score, is now the much higher number of stocks that have breached the weekly strong decline threshold, and that number keeps accelerating. Even if a bottom was made at current levels, it is reasonable to expect that a much longer healing, repair and recovery process will be needed before we can see a new strong sustainable market advance like happened after Jackson Hole/Labor Day 2010.
On the daily timeframe, the daily score is also trending lower, without any divergence from the August 9 low.
The daily market structure is not a market structure anymore. It is a (60%) strong decline structure. Being long for more than a few hours in such a weekly and daily decline is the most dangerous trading plan that you can make currently.
On the other hand, it is probably too late for shorting aggressively as some sharp reflex rallies will become more frequent from such oversold levels. A foretelling sign of such a potential imminent bounce is the percentage of stocks in accumulation and mark-up stages that closed above its 5-day moving average last Friday. In a weekly mark-up stage, this used to be a good buy signal. Now, in a weekly decline stage, it is probably nothing more than a short-covering signal. What else could it be with only 7% (NOT a typo) of all stocks in accumulation or mark-up stages? Once again, we need to go through all the repair process before buying confidently for more than a few hours for the prudent trader or a few days for aggressive traders.
Billy
“The daily market structure is not a market structure anymore.” There’s a Zen-like profundity to this statement, as structure devolves into a binary set of potentiae during illiquid times.
Comment by Bob English — August 22, 2011 @ 3:47 pm