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Third Time, Not So Charming


The S&Ps third new high since Friday's open is attracting more sellers than buyers.


S&Ps surged to a new high at this morning's open. Monday's open also printed a new high, and so did Friday's open. Monday's new high revealed cracks in the rally's strength, as S&Ps fell back under Friday's high. Wednesday's new high was also rejected by a dip back under its prior high - back under its two prior highs, actually.

Just reversing from a new high to back under a prior high is "rejection" that signals a momentum peak. A single leg that reverses back under two prior highs is simultaneously signaling both a momentum peak and a momentum reversal.

The market has until today's close to overcome the open's bearishness. A close above Friday's high would go a long way to resuming the rally's momentum. A close also above Monday's high would go further, because closing under Friday's close would trigger a separate bearish setup called a "Gotcha!"

Meanwhile, signs are appearing of too much optimism for a rally to be maintained. This morning's low bottomed upon filling the gap back to yesterday's close - yesterday's futures market close. The cash session close was lower, and filling its gap would have made a recovery more credible. Yesterday's low was similar, bottoming at last Thursday's futures market close, too optimistic to be bothered with actually filling the gap back to Thursday's cash session close.

Recent NDX outperformance has been another sign of too much optimism. By satiating speculative buyers instead of making them hungrier, their hunger might be sorely missed during another sell-off attempt.

If today's close were back under Friday's opening high without selling yet being obvious, then it should be obvious soon after Thursday's open, and throughout the day. But if today's noon hour isn't exited above Friday's opening high, then selling could be obvious before today's close.
No position in stocks mentioned.
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