Stocks at Critical Support But Show Weak Internals

As per the intra-week Briefing on Wednesday, the countertrend move occurred beginning on Thursday and into Friday’s trading. There are two intermediate term scenarios potentially playing out. The first is: the move off of the highs is not complete. So far, that is the indication. The move over the last two days has all of the characteristics of a countertrend move. Therefore, I have to expect another leg lower. We may see a high above today’s high, but if the internals do not strengthen significantly, it will likely be retraced and another leg down will begin.

The second is: the move off of the highs is an intermediate term countertrend move and it is complete. As of today’s trading, I believe this is a lower probability. There are no certainties in trading, therefore I have to consider all possibilities. If this is the case, you will see price accelerate above Friday’s high. Volume and breadth will increase significantly. Right now, the internals are suggesting the move off of today’s low is corrective to the impulsive move lower. But, that can change.

Short term, I expect the potential for a high on Monday above today’s high on weak internals. If that occurs and we see today’s highs traded through to the downside, it will suggest the next leg lower has started. Holding above today’s high will suggest the alternative. Breaking today’s low, suggests another leg lower has begun

Watch the Russell. It can give an early indication of the beginning of another leg down. It signaled the current move off of the highs. If it breaks today’s low and the other Indices are lingering just above today’s high, it will suggest the other Indices may follow.

DAILY BRIEFING 181012 from Joe Mertes on Vimeo.

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