TODAY'S BREAKDOWNS (NO BREAKOUTS!)

Well, all I can say for the market is, “Not Good”. Technically, the overall market already broke down if we don’t count the low achieved on October 12. This low that occurred on Friday on high volume was the absolute last level remaining before the market threatens to go into free fall again. Right now, the chances of a major rally to the upside are slim. After all, you need fresh buying power, a.k.a. Money, to fuel a rally, but people lost most of it, so who’s going to start and sustain a rally?

We are still consolidating and that is evident by the fact that volume is light. We should see double (or near double) the volume if a breakdown did occur. What may be almost certain is that this week is crucial in shaping how the markets will look like till the end of December. Keep in mind that this is still an ultra short-term trading environment, and that means it might not be a good idea to hold a lot of positions overnight. Cash is king in this market.

As for breadth, the trend as not changed except that we’re making hundreds of more new lows. The new highs tally couldn’t be more depressing. Typically, the number of breakouts coincides with the number of new highs (this also applies for breakdowns and new lows), but that doesn’t mean they broke out. In fact, I haven’t found a single one that actually made a clean break. And as always, I had to limit the number of breakdowns to feature. My notes this time will highlight loss prevention with emphasis on the 20-day moving average.

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TODAY'S BREAKOUTS

Emphasis is placed on breakouts rather than breakdowns because today is the first day where I’ve seen more breakouts than breakdowns in a very long time. We are at a weird stage in the market right now. Many stocks have broken out to the upside, but most stocks are still within consolidation. Given that we have hundreds and hundreds of earnings reports this week, the market will continue to be volatile. Even today, the market zigzagged, forming an ascending triangle, which later broke out. Again, I am seeing considerable strength in the materials and industrials sectors and they are leading whatever rally we do get.

Most break outs, including the ones listed below are at a point where they are going to test 1) the 20-day MA, 2) September’s low, and then 3) the 50-day MA. The 20-day MA is not some magical indicator, but it’s what most stocks primarily follow during uptrends and is a secondary indicator for downtrends. These three present key resistance levels that need to be broken for stocks to climb out of their hole. It won’t be easy, but here are several names to focus on:

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