When they squeeze shorts into the close, especially when the downside leadership sectors of the bear market get squeezed in the last hour, especially if this happens when the indices are freshly broken, that, my friends, usually means "grab your popcorn !"
Following are MP weekly and daily. Why I bring this up? Because two major components of this index today got squeezed in the last hour. To understand what it really means, you have to look into the entire leadership complex.
xTrenders will remember that, back in July 2009, my projection for this index was as follows.
Projected Top for MP
The projected top was a milimetric nail in the head. You know why it worked so well? Because this index can not be manipulated as it is the locomotive of this secular bear cycle. That is why this index topped out in late August when it tested the breakdown marked by the blue horizontal line and going down ever since...
Using one of the fundamental rules of xTrends theory, "In strong downtrends, continuation flags or other forms of corrections doesn't test the broken trend structures, they can only test the breakdown points before the next down-leg begins.", we could have spotted the top which leads to the next stage, an important swing low around 740-750 on this index.
As indicated on the first chart, slowly but surely, the index is approaching what appears to be an intermediate term dynamic support. It is highly likely that when MP breaks below this dynamic support, the selling will accelerate across markets.
Today's late day short squeeze was a cause building. Because all major indices were broken as of Friday's open. Some of these indices, especially bear leadership group back-tested their breakdowns at the close: a perfect short setup.
We will likely see accelerated downtrend in coming days which will surely put MP index below the dynamic support that will immediately lead to broad selling across the markets. Also don't forget to watch Bank of New York. That sucker is on the ledge now.
