Wednesday, October 8, 2008

TODAY'S BREAKOUTS & BREAKDOWNS (10-8)

I didn’t write my breakouts & breakdowns yesterday because I was killing myself working on my blog and didn’t feel too well. Seemed like I had my own breakdown!

We had a very neutral trading day today, being bound by even support and resistance areas. Yesterday’s close also provided key short-term support and resistance. Today was also a Doji day for the S&P 500, or a day full of indecision. That can sort of be applied to all three indices, but the S&P 500’s pattern was a textbook definition. The NASDAQ was a Red Hollow day, or a day where the index gapped down but rose throughout the day. The DJIA just formed a regular down day.

Apparently, we still have not seen capitulation and I’ve been suspecting the lack of short-covering as the culprit. Total volume is still down and under normal circumstances; we should have hit “the highest daily volume, ever” records consecutively. The ban expires today (unless the SEC decides to stupidly extend it) and we should see volume pick up and I hope to see that special day where we gap down 300-500 points right at the open and rally throughout the day. That’ll be official capitulation. The market is extremely oversold and I haven’t seen any of my technical indicators go so far off the charts.

As for new highs and new lows, we made 19 new highs and 3,226 new lows. This is greater than any other breadth reading I can think of. As for breakouts, we had only one. Just like the past few weeks, we had so many breakdowns that I could just close my eyes and point at my screen and find a breakdown no problem.

Royal Gold (RGLD) broke out today, one of the very few gold stocks that did so, and just one of the very few in general. Breakdowns are profiled with my comments and how you can prevent having your stock on my “S” list in the future.











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3 comments:

Anonymous said...

Hi John,
I have shorted SCHN yesterday at 26,5 in spite of knowing that market is oversold and rally up is possible. The reason might be what you wrote in your charts - I need a lot of breaks to confirm trend and when I finally make some decision it´s probably too late. What do you think (or everyone) of this problem? Do you have the same one? And what are your ideas about SCHN? Buy to cover it today?
By the way, thanks for your links, John!

John C. Lee said...

At the end of the day, if SCHN is still down, this is a great short and I don' think it's too late. If it's up, it might be up for only 1-2 days.

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