Market Internals 2011-10-03By on 2011 Oct 3 Mon 8:12:13
Since last update we got the major selloff I’ve been looking for.
Now, 3-day advance issues is back down at oversold level, while Tick16 Short Term is forming potential higher low.
Normally, if we get a flush low lowered than the swing low from August, we have a long setup in place.
But, due to market intervention by so many parties throughout last month, they have killed the strong rally potential themselves.
Tick16 Long Term is now in solid trend sell territory thus market pops from 3-day advance issues, especially those that last for couple of weeks can be sold into.
There are 2 ways to get out of this bearish condition.
First, sharp selloff resulting in a spike divergence low on Tick16 Short Term against ES. That means ES produces 2 legs of selloff within 2 weeks and that the 2nd spike low ended with a higher low in the Tick16 Short Term index.
Second, grind sell till 3-day advance issues stuck in the bottom of its range long enough to produce a strong oversold condition. That can take several weeks to form and ES has to stay in a bottom zone for several weeks to make that happen.