While the breakdown has taken more time than I had anticipated, the rally and then failure today has changed nothing. As a matter of fact, in a way it has strengthened the outlook for lower prices as a day of very strong buying early (Small Investors) turned into some very strong late day (Institutional Investors) selling.
Actually yet another good lesson here that many of you might not be aware of.
The first part of the day 9:30 to 11:30 is mostly comprised of small investors trading their portfolios so as a general rule we can look at early trading as a counter move to what the future could hold. 2:00 to 4:15 pm is the time of the Big Boys and the smart money as they unwind their positions that they either bought from or sold to the early morning small investors. Take a look at a 5 minute chart sometime and you will see this pattern occur over and over again.
Today was yet another banner day for call buyers as the put/call ratio continues to decline into an area that is quite indicative of market peaks.
Intermediate and Long Term investors need to remain very cautious here and short term traders can look for short selling candidates and index put options.
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