If you are a regular reader of this blog and a short term trader, you had no business holding any long positions over the weekend. My timing signal, indicated by the red arrow, switched to down last week and Friday’s advance was quite weak. In this 60min time-frame I see a confirmed head and shoulder pattern that’s not perfect, but it’s there, and the late day buying is more likely a knee jerk reaction. Given that we’re on the wrong side of resistance I think the path of least resistance is down.

I’ll be looking to add to my short positions tomorrow (and now after checking the futures which are decidedly in the red) that may not happen. I would have preferred a gap up, but if the gap down isn’t too large, I still may as my signal worsened today and it appears as if this sell off could gather some steam.

Market Timing Chart

We broke all the major powerzones today and you can see how feeble of a late day rally it really was when you compare it to the large red candle. This is normal retracement after a significant move lower and we should see more follow through tomorrow. I’m starting to get my longer term buy watchlist together and right now it has IVR LEA RVBD SWKS on it, but it would take a major flush out to get me interested in these names.

Downside volume finished around 88% today, so late day buying kept it out of the extreme oversold nature of 90%+ and I would like to see it much deeper to trigger some sort of capitulation.

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