Germany Slowing Further; S&P 500 Monthly Trend Line Hit And Reversal

When you have negative divergences on an index chart or any chart for that matter, you're waiting for a gap down to occur in order to get that negative divergence to kick in and create real downside action. The gap down we saw today was quite powerful, but what was even more impressive was the gap and run lower. Many times we get a gap down, but most of the damage is done in the first few minutes. After that, the market starts to recover and all is forgiven. This gap down didn't have those characteristics. Quite the opposite. It gapped down quite nicely and kept running lower. A sign of real selling from the big boys and girls who rule price. A negative divergence can be in place for weeks or months before the right candlestick hits and carries it appreciably lower.

The gap down is always the best news for the bears when this situation exists. Today's action with the gap and run is truly important because it's a change of character. It's essential to focus in and recognize a change in market character as it can tell us what to expect for the short-term at the very least. A gap and run with force hasn't taken place in a very long time, and since it came from near an all-time high, you have to take notice. It's telling us that the negative's out there are for real and that the market is respecting them. For a long time, the market hasn't respected the real world, but the culmination of bad news recently on the economies globally are starting to take hold. The red flag is up with today's technical action. We're still above 2134, but we're now nowhere near 2194. Oh so close, but no cigar.

Germany had a report last night that said their imports and exports were going in the wrong direction. Increases of 0.8 and 0.3 respectively were met with readings of MINUS -0.7 and -2.6 respectively. Huge misses, and yet another sign of how bad things are not just here at home, but all over the world, especially in key hot spots of supposed growth. Areas of the world that contribute mightily to the well-being of the global economies. The Eurozone, especially Germany, are looked upon to help carry the burden of growth, but the numbers that are coming in are painting a very different picture.

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