“Take back your ups and downs.” Jammin Me, Tom Petty
Markets exploded higher on the open following jobs report that exceeded expectations propelling the DJIA to a new all-time high of 50,499, lifting the SPX to within 6 points of the psychologically and technically significant 7000 level.
Remember 700/701 (7000-to 7010) aligns with this week on the Square of 9 Wheel.
What began as buying frenzy quickly deteriorated into a reversal of fortune.
Tuesday’s signal bar reversal in the DJIA held at the end of the day with a close below Tuesday’s close.
A 10 min SPX shows the viciousness of the reversal once the a Jump the Creek sell was triggered on offsetting the morning gap.
Up big on Monday and Tuesday following a waterfall decline, SHOP was up a massive 14 points more pre-market on Wednesday before imploding.
The Earning’s Reversal was signaled by a knife below the prior day’s high with a continuation sell signal as it offset Tuesday’s up gap.
From Wednesday’s opening high of 139, SHOP imploded to 109 in hours before leaving an outside up hourly bar signaling a retrace.
SHOP’s action Wednesday exemplifies the take no prisoners mood of the market.
While the Q’s mustered a small gain, a 10 min shows a bearish pattern: a 1 2 3 Swing to a Test Failure.
Checking a daily QQQ shows the large range outside down day following the picture perfect kiss of the now declining 20 day moving average for a Holy Grail sell signal.
Notice the Q’s reversed from a third backtest of a key trend line…the Bottoms Line connecting the November 20/21 low with the January 20 low.
This Bottoms Line issued a trend change on February 4 and returned to the scene of the crime this week for the third time in as many days.
Will the third time be a charm for the bears?
QQQ underpins the fragile juncture of the market underpinned by indiscriminant selling in software and other high profile tech names such as CRM, IBM, PLTR, ALAB, and RMBS to mention a few.
This is juxtaposed by urgent buying in other tech such as MTSI, SNDK, and TER.
It will be important to see whether momentum monsters like MU, LITE, SNDK and WDC rallied on Wednesday in the context of distribution patterns or whether new up legs are on deck.
The time frame going into Feb 20 OpEx should tell the take as that is 90 days/degrees from the key November 20/21 low.
Wednesday did internal damage. The NYSE net advances were a meager +198 while NAZ breadth collapsed to -1,118.
The divergence between headline highs and underlying participation reflects a market whose structural integrity continues to erode.
Leadership remains fractured, and Wednesday’s reversal at near-record levels underscores the exhaustion.
Notably Hindenburg Omens were triggered on both the NYSE and NAZ as new 52 week highs and new lows each accounted for more than 1.8% of total issues traded on each exchange.
The statistical reality is straightforward: every major market crash in history has been preceded by this signal.
That does not mean every signal results in a crash. Rather, it means the signal is a necessary—though not sufficient in and of itself—condition.
It reflects profound internal dispersion and instability beneath the surface of the averages, and indicates that, despite recent record highs, more and more stocks are breaking down to set new 12 month lows.
In sum, a powerful news-driven surge that fails immediate at record levels, combined with deteriorating breadth and confirmed Hindenburg Omens, is evidence of vulnerability.