The Danger Zone

A quick notes — as I got into Vegas late last night, and have a panel discussion in a few hours:

Yesterday’s close took us below the May 6th Flash Crash closing prices. The DJI, S&P 500 and NASDAQ that session’s intraday lows (at 10,241, 1094 and 2228, respectively). Closing below May 6th’s end of day prices is technically significant.

After the flash crash, we were discussing were this could go, and I could not help but think the intra-day lows of May would now act as a magnet.

This places us in a precarious position: The downside target is that intra-day flash crash low. If the volume lightens up as we approach it, that would suggest a “successful” retest of the lows, and set up the next up leg.

Volume continues to expand on the downside, suggesting that it is supply (not demand) driving the most recent action.

Market internals might provide some insight as we head towards those lows as to the probability of penetrating that level. If that occurs, the next level is significantly lower.

We remain overweighted in cash — not quite 100%, but damned close . . .

~~~

Futures are firming, but its still early.

I’ll update as we get fresh quantitative insights from Mr. Market himself . . .

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