In Wednesday’s Briefing, I explained how it appeared the Stock Indices were strengthening slightly on the rally off the recent lows. However, I also stated I was concerned over the rally because of the inter-market divergences that existed. Not all of the Indices looked as if they were ready to rally significantly. The selloff that occurred in today’s trading could have a significant impact on the analysis for the coming week.
As you will see in the Briefing, there are indications the rally off the lows is becoming countertrend to the downtrend we just experienced. If this is the case, then there is another leg down that may be in the process of developing. This leads me to believe that what happens the first part of next week will increase the probability of one event occurring over another and lead to a large move. The key reference area to watch is Thursday’s high. If that is traded through and the internals are strengthening, I fully expect the low is in. However, if Thursday’s high holds on any rally off of today’s low or even a slightly lower low on Monday, then the probabilities will increase we are headed down.
It should be a very interesting week ahead of us.