Rally Dead?

Posted by downtowntrader | 5/30/2006 09:53:00 PM | 0 comments »

Today was a pretty negative day with no signs of any hope for Bulls. There was no news to spark the sell off no matter how the media spins it. So the indices are quickly back in a precarious situation appearing like they will test recent lows. This is why it is dangerous to try and pick bottoms as there are all type of shakeouts and weakness as trapped longs and eager shorts wage their battles. Looking at the indices there are still signs of a possible bottom and I wouldn't be surprised with a gap down and capitulation as early as tomorrow. I also won't rule out a complete breakdown however, especially with all the bearish engulfing candles today.

Here is an updated $COMPQ chart showing it at a major trendline. The Nasdaq is about as weak as it has been in over a year. Will it try and reclaim leadership, or is this the beginning of serious problems.
Here is the $SPX daily chart. It still has plenty of room to hit the bottom of the channel, but I wasn't expecting a touch of the channel till it cleared 1245ish. We'll see how it resolves.
I've mentioned how I have a custom scan setup in trade ideas for stocks breaking down. Here is a Candleglance of a few that turned up today.

10 Possible Shorts

I set up this scan to look for stocks making a new 8 day low, but paying special attention to where in the yearly range the stock was. This scan looks for stocks that have already topped vs trying to pick out the tops themselves.

I am posting a link below with the precise setting I have been using. It will only work for suscribers, so if you have suscribed recently, feel free to test it out. I would appreciate some feedback from those who try it out.

To test it out, Right click the link below and select copy link location. Then right click on an open Trade-Ideas window and select collaborate. Then paste the link into the collaborate field.


Click OK, and you're done.

While I think shorting here may be dangerous, those thinking about using this scan can start monitoring since we are seeing a lot of weakness even on up days.

Good Luck,