The market is toast. Collapse might hit in but a matter of days. There simply is no other way to read the technical tea leaves.
Surely, this outlook — altered only as regards the timing of collapse — might be different had some measure of balance been evidenced today. Still viable would have been my most recent view supposing wave (c) of (2) higher was likely unfolding off last Tuesday's low. However, this view took a dramatic turn for the worse today.
I'm sorry, but there is just one thing to conclude about the imbalanced charge into the close leading to such an extreme 5-minute RSI reading: suckers by no means have been washed out.
You mean to tell me that, after two solid months spent languishing following the most spectacular one-hour crash in the history of the stock market — let alone on the tail of last week's performance — there was no good reason to put up for sale some reasonable portion of shares during a rare moment of strength, thereby lending some balance to today's charge higher?
It is bad enough that, no measurable degree of selling was forthcoming at noon today. But to chase the bid into the close? Such is seen the mark of the worst kind of sucker: the one who never learns.
My view here would be different had some balance between the buy- and sell-side been sustained over the entire course of today's trading, much as had been the case up until the final hour. Indeed, I still would be singing my wave (c) of (2) tune, such as had me expecting the unexpected a few days ago, were the imbalanced charge higher into the close delayed even until tomorrow's open. However, extraordinary strength at the end of the day at this all too early hour in the formation of a prospective wave (c) of (2) higher has me believing that tune is badly out of key. Something else appears afoot, and it just might be collapse looms.
Sharp spikes in relative strength noted above — occurring on the sell-side of RSI's balance — find precedent in 2008, just prior to the market's collapse. Seeing this occurring in the midst of negative momentum (MACD) — now stabilizing, as anticipated — is all the more fearsome.
Remaining within the realm of possibility is an a-b-c "zig-zag" down from June 21st peak, continuing the development of wave (2) of (C). If this proves the case, today probably was the larger part of wave b [of (b) of (2)]. For the moment this is my preferred view, because a wave (c) of (2) higher (unfolding later this month and into August) would stand to lead indexes to revisit now declining moving averages prior to wave (3) of (C) — collapse — unfolding. Such an occurrence seems better expected, considering 50-day moving averages only recently have crossed below 200-day moving averages.
Also possible, though, is wave (2) of (C) ending on June 21st and wave (3) unfolding since, with today being the better part of wave 2 of (3). We will see.
Any follow-through to today's surge should be limited if in fact trouble looms, as appears likely given the technical state of things. Every measure presented here from time to time reveals weak conditions only brought into some balance as a consequence of today's trade. With this balance achieved, then, the stage is set for still more weakness. This could even precipitate collapse.
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