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SPX stock chart

Capitulation In Markets Could Signal Bounce Is Coming

We finally have a capitulation or flush candlestick today on the major indices. Flushes often mean that a short-term bottom is in.

SPX stock chart

With the Burial Cross likely to happen tomorrow on the daily chart, I would rather error on the side of staying in cash, especially with the 1-hour chart showing the 13 hour MA is still below the 30 hour MA.

SPX hourly chart on 12-6-18

The Russell 2000 had its Burial Cross back in mid-November and now it looks like the S&P 500 is going to follow.

Russell 2000 stock chart

Even more troubling is that major psychological damage has been done to bulls over the last three failed rally attempts since October 2018.

Equity put call ratio chart

This kind of psychological damage is not erased by a one-day flush candlestick pattern IMO.

SPY had a large 4 million shares block order at 1:46 PM. It was likely a bullish buy order if SPY moves above $266.50 or a bearish sell order if SPY falls below $264.46 tomorrow.

SPY stock chart with dark pool levels on December 6 2018

S&P 500 overnight futures do not support a flush candlestick reversal. Futures are slightly down as of 7:57 PM on December 6, 2018. You would think that on a capitulation move, overnight futures would be up big and would cause a gap up open tomorrow on a ‘V’ bottom bounce. We are not seeing that on the overnight futures market.

S an P futures 12-6-2018

Finally it’s Friday and while the big Jobs report is coming out tomorrow, Friday is not a good time to go long when there’s so much geo-political drama that could hit over the weekend news cycle. I still favor a sidelines and in the safety of cash position until we have more data that can either confirm or deny that a capitulation bottom was put in on December 6, 2018.

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