Possible Rally Ahead

Have to respect the falling wedge pattern that has developed on the 30min charts over the course of the past couple of days. Although I believe the longer term trend has indeed changed, we have to respect an oversold bounce to take in effect. Today's action was very weak for the intermediate term in my opinion. It appears as if the sellers are in control.

The Trendline Retest

To explain a little bit of what I mean. Take a look at the chart posted above. Notice the past couple days before today we had some pretty large candles. What I saw happened was initially a break of the trendline support which sparked intense selling pressure. We closed at the low of the day as people sold out as the trendline became more obvious it was going to break. This trendline represented what was holding up the markets rally since March, and everyone was watching it (as they were with the Head and Shoulders back in the Summer).

The only way to save a break of the trendline is by doing what we did last Thursday. Typically you want to see an open on the cash index right at the previous close and you want to see a strong rally right at the open (avoiding any type of tail on the bottom). Usually if you can close near the height of the previous candle, and save previous support, you have completed what I like to term a fakeout reversal candlestick pattern. This is what happened on Thursday and I was actually a bit bullish going into Friday. However for the first time I've ever seen - or at least can recall - we registered back to back fakeout reversal patterns as we rebroke support on Friday and dropped nearly 300 points in the Industrials. It makes it appears as if Thursday's rally was just a retest of the old trendline. I believe this is a monumental development going forward that indicates that in fact we have begun a new downtrend. We shall wait to see if this downturn turns into just a bull market correction or the continuation of the old bear market.

Transports

Here is the transports chart which continues to underperform. Don't be too caught up in the Industrials and ignore whats going on 'behind the scenes'  in some of the other sectors of the market. Transports are getting slammed are are actually looking to be due for a bounce. But that would be in a normal market, the fact is we were so extended to the upside this actually appears to be just getting started. Again time will tell.

Banking Index

Possible head and shoulders top in the banking index, or triple top. What do you think? Either way it appears some type of support was broken as indicated by the blue line. We are in the process of retesting. This is painting a pretty bearish picture, so it will be interesting to see what they can do to recapture that support. If there wasn't that falling wedge in the SPX and I only saw this chart I would be pretty bearish right now in the short term.

USD

I do my best to try to include some original charts that you won't find elsewhere. Here is a long term chart of the DXY Index (US Dollar). The chart is split in two and the peaks are matched up. I would say the dollar appears to go through a cycle of highs and lows and that we are about to start the next bull market in the dollar according to this cycle. However its only worked twice, who's to say its going to work a third time...