Stars have aligned, how far do we go?

Today we saw a nice bounce in the dollar, perhaps even a reversal, which sent the Industrials swinging from up 100 points at the open to closing down 104. That would be a 204 point drop intraday controlled by the bears (mainly occuring all within an hour's timeframe). These are some strong selloffs on heavy volume to fuel this downturn in the markets.


Market Breadth and Trendline

My breadth ratio signals the heaviest downward breadth in the markets we've seen this entire rally. We've had two back to back 7:1 Down days in regards to NYSE Up to Down volume. Even SPY volume hints at distribution over the past 4 days, which has shown a significant boost in volume to coincide with this selloff. With that said I cannot rule out further upside until the trendline breaks. I'm hoping we see a gigantic selloff on the break and not another fakeout. That trendline seems to be something everyone is watching, very similar to the head and shoulders back in July. We all know what happened then.


The 61.8% Retracement

Going through my charts I noticed that the QQQQ's touched their 61.8% retracement to the penny on 10/21/09. I believe you could try buying puts here and while setting the stop at 43.82. The bullishness behind the big technology companies is still evident in the market. Eventually it will fall like the rest.

Transports

The transports never made new highs as I've posted before. Their chart continues to look more bearish each day and is dangerously close to breaking the trendline.


Silver vs Dollar

This is how most commodities looked today, including the EURUSD.Everything got slammed while the dollar was only up less than 0.70. Imagine if the dollar goes up $3 what will happen. There was once 3% bulls in the dollar, this also correlates well with the time Gold was all over the news. There is obviously a ton of short interest on the dollar which should create a massive short squeeze. You can bet that the institutions have made some pretty large bearish bets on the dollar by buying commodities. In addition, to the retail investor the only option to shorting the dollar is UDN, which barely moves and is not leveraged. Therefore you can bet any retail investors who are trying to play the dollar are in the commodities. If there is a short squeeze all commodities will see an equal effect on the downside.

TD Sequential

Charted above is the SPX Cash Index and the Nasdaq E-mini. Both have posted 13's on the weekly. On the daily (top picture) the SPX posted a TD Setup 9 to coincide with this weekly 13. This is just further evidence that the top may be in.

1987 Market Crash vs 2009 Market Rally

1987 TD Sequential