Wednesday, August 6, 2014

6:56 AM

Yesterday’s intraday selloff shook the confidence of the bulls.  A sharp spike down unnerves even the most bullish, especially when the snap back rally is muted as it was yesterday, but the bulls did have enough energy to get the NASDAQ Composite back above the 4350 critical support line.

The Spinning Top candle indicates that neither side is in control.  Had the bears been able to close the Composite below the 4350 line, they would have been in charge, but since they did not, the market is at stalemate.

Support is essentially the lowest price for an index or security that is likely to be reached, and is considered a worthwhile price to pay. We can clearly see on the NASDAQ chart that the area is the 4350 level because the bears have been unable to close the index below that level.  Even though yesterday felt like the bulls had given up, when we look a little deeper we will find that internals were barely negative on heavier volume.  A strong breach of the 4350 line with confirming downside internals of 3 to 1 or more would convince me that the correction is underway, but I have not yet seen that. Also, small caps were actually doing well yesterday before the spike down in the futures. The decliners vs. the advancing stocks in the small cap indexes were only slightly negative.

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