It was an extremely volatile Friday for traders, a very typical big event day. Opened up, broke down and went back up with full forces, what a day! The critical 1040 still holds, bears aren't you worried? In my view, the big downtrend has just begun to unfold, there can be bounce down the road but would be limited.
Did you notice when last time SPX index was at current level? Last September as shown in chart 1 above. For almost a year, SPX has done nothing. I plotted two arrows in the chart to show you the volume at price as well. We have broke down both of the congested areas, most people investing since last fall are losing money, therefore any rebound towards such levels should be met with significant supply. I perceive Friday's rally as just a gap filling on the daily chart, the upside potential is very limited.
The second panel in the second chart shows the breadth of the market. It is very clear that the advance volume is tipping into 'recession'. Mean while, it has been 15 consecutive weeks that money flow out of equity. Financials and technologies accounted for 35% of the total market value, they usually leads the market higher in a healthy bull market. However, what I see in the chart is that both the financials and technologies are showing very weak relative strengths to SPX index. I don't think the market can hold up without the participation of such two important sectors.
From an intermarket relationship. USD/CAD has broken out of a long time consolidating triangle. The pullback towards the triangle will be met with decent demand for it to make sustained move in the near future. This is very bearish for equity, US and global.
