'tis here

The big drop on Friday night and today has certainly drawn a lot of comment! I'll try not to add too much to it other than a review of the basics here (even if they're obvious).

Firstly the ASX:

The XSO is continuing to show some relative strength when compared to the XJO but there is as yet no divergence on the chart. In any case the longer term view is that the XSO has been significantly more bullish so it's not as though I'm looking for signs of the end of a bear market.

Todays drop on the bourse has brought the 38% retracement into play but I'm not buying it. Sentiment has been too high for too long so I will wait to see a whole lot more sideways to down price action before I get any confidence in a potential low.

The bearish indications on the CBA and MQG charts (refer to previous post) are playing ball with both stocks down and CBA having dropped below previous support.

Breadth indicators for the ASX have been bearish for some time. There were some positive divergences heading into the weekend but they may well be gone now. Either way I can't see that the bearish bias of the market setup over the last month or more can be interpreted as having run it's course.

NYSE:

The RUT is down hard but it was also rallying a whole lot more than the SPX as well.

The NYMO and NYSI are negative again, as would be expected.

I suggested two possible scenarios last week and the market did neither! Option A was an immediate drop (which I didn't expect to see) and option B was a spike higher before collapse. Instead the market made a small rally to print a lower top before the collapse. C'est la vie!!

The breadth indicators are pretty much useless at the moment. Nothing is overbought or oversold and nothing is diverging, up or down. The trend is down and the longer term NYMO and NYSI did call it but where to from here?

Here's a couple of things...

• There are some good odds that an intermediate term top is in.
• There isn't anything as yet to say that the decline has bottomed. 

BUT...!

• New lows on the NYSE hardly budged (chart below) and the cumulative NYAD has to be viewed as bullish.

SO... Shorts are the go but current prices are not my idea of a good entry. Instead I'm inclined to either look for a lower top (viz. 38 to 62% retracement) or wait for a much lower low to go long.