SHORT TERM: NEUTRAL
Needless to say we’re not impressed with todays action. Again buying at the open met with immediate selling, and a midday bounce met with last hour selling. The weakness was all the NAZ/NDX, while the DOW/SPX held steady and the TRANsports attempted to rally. We’re posting one chart today: NDX 122905. This chart displays most of the story. We’ve been posting our EW pivot points for weeks now (upper right in blue). The market sold off but held at 1658. When we started to rally, we witnessed the NDX run into resistance at 1690: three attempts to break through failed. We also formed a diagonal triangle by tuesday morning, (a terminating pattern), and the market quickly sold off. Now, 1671 is providing resistance, and the last three days we have failed to break through. Short term momentum (circled in green) was oversold as it usually gets during an uptrend two days ago: the market failed to rally. In fact, after working off the oversold condition by going sideways, the market turned lower. In uptrends, this is how an overbought condition is sometimes dealt with. Now we are getting the reverse. Lastly, the six consecutive days of gap up openings that have failed to initiate an impulsive wave rally.
INTERMEDIATE TERM: NEUTRAL
We switched early this morning, for the first time in over two months, to a neutral position on the intermediate term trend. Unless the market closes higher tomorrow (friday) the intermediate term uptrend has reversed. In fact, we can consider todays close in the NAZ/NDX/SPX as a ‘KEY’ closing price. Any close below this level, from here on out, would confirm a reversal in the intermediate term trend. Also, our MMI, the internal measure of market momentum is falling off quickly. Not a good sign for the uptrend either. If the market holds here, and moves higher, we’ll get a resumption signal. But with the DOW already confirming an intermediate term trend reversal we’re not too optimistic. Thus, a more neutral market position is warranted. And, we took some profits.