Question about crash low test

If price makes a lower swing low on a closing basis but not
yet reaching the crash print low, and if a divergence happens
to show up, is it valid, or only if new print lows are made ?

I'm asking this because this will be an important decision for those short, whether to
take partials and try to reload much higher or not.

In other words, if one waits for the print low to be exceeded a divergence will not exist. Five of 1 down ?

My take would be to compare the breadth momentum rather than the price momentum about making such an assessment. The breadth momentum made a lower low than Feb 5 low, the price has to exceed the initial price low from 2 weeks ago at a minimum, ideally Feb 5 lows should be taken. In terms of looking at the prices, you had the 50 points gap that's about to be closed, the gaps are the inflection points, it means there was not enough capital deployed to sustain the inflection point. The moment the inflection point is violated, you would expect lower lows to follow. So, however you dice and slice it, we should see lower lows, there could be a reflex bounce as 1100 is about to be broken, but it is not where you pick a bottom... The nominal 16 wk (4.5 month) cycle lows are due from here, we should have a low probably this week --given the little time and accelerating nature of the market, I would think 60 points lower by Thursday or so, we should probably see a substantial last minute rally on Friday. There has to be some sort of retest around the end of the month, we may still see a nice bounce into early summer. My target remains around 1050 for now.

Edited by arbman, 18 May 2010 - 09:39 PM.

Arbman, good point about breadth momentum, don't want to overlook that. I think we get a good bounce later, if it is a wave 2, should not be more than maybe 75 points.

What really bothers me how we got so many new highs only to ridiculously fall apart so quickly, I expected one more high attempt before such a big "crack", indeed the initial decline of 60-80 points was largely enough from 1220. Instead we are going for potentially about 150-200 points, quite insane.

This must be the volatility difference in between the Fed buying the junk bonds for 12 months and not...

"My target remains around 1050 for now." I'll see your 1050, and lower you 100. 950 will print intraday, imho.

I'll see your 1050, and lower you 100. 950 will print intraday, imho.

Argh... fell of chair... gets back up... Err... coughing sounds... clears throat... silence for 10 seconds... some scratching of the head... an audible deep breath...

E-hem!!! Could you please tell me why and in what time frame?

Instead we are going for potentially about 150-200 points, quite insane.

Arb, you gonna post such stuff, you are gonna hafta change your signature line. Looks to me that you are seeing a crises coming...

Does it look like I saw this one coming, not really and then spooky just introduced something above I thought I've been seeing them all coming now! Nope!

I'll see your 1050, and lower you 100. 950 will print intraday, imho.

Argh... fell of chair... gets back up... Err... coughing sounds... clears throat... silence for 10 seconds... some scratching of the head... an audible deep breath...

E-hem!!! Could you please tell me why and in what time frame?

I'm thinking within the next 2 months, easily. A true bottom will be an intraday slam down like that-where you finish the day 30 or 40 SPX points off the bottom. My target is there due to my wave count, and with the added knowledge that the last hard move down will include panic. Another issue is that the problems are worldwide-we are not insulated-we trade with these folks. The conditioning of Bulls over the past year and change to expect nothing but up has left them with particulary weak hands, imho. Reminds me of my days trading commodities where that was quite prevalant. I made the comment on the first 300 point drop that I saw it, and it would be dangerous going forward-it sure was-and imho, remains a problem. It's especially important in these times, because investor panic then signals the machines to sell-which signals other machines to sell.