22 across the 93 line gives a count of 74-71. This is nearly 2 months of distribution.
Just in case you thought there was no bubble after the bubble. Above is the ratio of Nasdaq volume to New York Stock Exchange volume. The bubble making machine is still intact and can blow some beauties. Note the energy index below as well.
To follow up on the discussion some weeks past about financials being the down side leader: The banking index penetrated its May low in June and is below the May low now. It has yet to fall under the June low.
A few months ago this blog began posting charts of the commodity indices to show the incipient bull market in commodities, energy having been among the strongest. Please now observe the top is likely in place. The largest previous decline in this up move was in April and was around 27 points. In June the decline was 32 points, a sign of weakness that should not be ignored. The up-down pumping action the last 4 days in June frequently presages a turn in trend and this occurred at a lower high.
We must mentally adjust Thursday's volume higher as it was the day before a holiday and it in fact was larger than Wednesday's. The wide spread, close at the bottom on our mentally higher volume could not be more bearish, especially coming after the weakness and lack of demand that has been the substance of these comments for quite sometime. This very weak back-up to support/resistance was followed by heavy selling. Declining beneath 888.86 according to Mr. Wyckoff confirms the trend has changed to downward. Distribution began in the first week of May with the very high volume and continued until demand was totally exhausted July 1. Look, you can see it. This is far more real and experience close than RSI, MACD crossovers, or Elliot Wave which are statistical or theoretical. This is the market talking to you as clearly as it can. Of course it can change its mind, but with this much distribution the upcoming decline can be a doozie. The point and figure chart at the top uses these dates in our calculation.
Both the hourly and 5 min chart show extreme weakness. In the previous 2 days not one hour exceeds the high of the preceding hour. Similarly on the 5 min not one rally exceeds the high of any rally of similar stature for the past 2 days. As such one could argue that we are oversold and a normal bounce off of any of the many strong support lines 1.0-2.0 points below the market is in order. Unless demand should magically appear, such a bounce should be weak and confirm all the indications of weakness we have discussed.
I would like to make an editorial comment here. This is the first time in many months the market has responded to bad news in anything like a rational manner. Thursday's unemployment report and the budget crises in multiple states are disastrous for the Obama plan. The stimulus package aimed to prevent job loss in the state and local governments and thereby save jobs. Job creation was secondary. As the surprise loss was in government jobs, even before the state fiscal crises hit, this plan failed. PPIP has seemingly disappeared. There is no plan B. We once again are faced with the problem that in bubbles the citizen, taxpayer, voter, homeowner and consumer, the citizen takes on too much debt to finance his asset purchases. The financial intermediaries extend too much debt. They have too much money to lend and too much money also warps judgement. Asset prices and debt loads rise until the citizen can no longer support his debt load. The bubble bursts and the great liquidation begins. People cannot pay their debts, prices of assets fall thus toppling financial institutions, exposing their all too human foolishness, and toppling even those citizens with what were once prudent debt loads. Unable to finance further purchases with debt, unemployment increases. Transferring debt from consumer and homeowner, or more importantly from financial intermediary, to citizen via government borrowing does not fix the problem of the overextended citizen. Perhaps it makes it worse. It is rather like borrowing from your Visa to pay your Mastercard. The whole idea of preventing job loss by borrowing to maintain jobs in the areas not dependent on the overburdened consumer or homeowner is too smart by half and has nothing to do with the problem; the massively indebted citizen and the financial intermediaries who cannot collect on their debts and whose collateral is worth far less than their loans. To come back to earth, this is why the banking index, the intermedaries, are the down side leader.
Another bubble popping? If not now when?
I want to go over this chart in some detail as the selling points and thinking were for the most part real time on too little sleep as usual. In other words this is a practical method. The market gapped to a higher open and after some consolidation began to move higher. Now I was expecting the gap open and because of the weakness I commented upon a few posts ago, I was prepared to find a top. The first bar that struck me was 10:00a.m. It is a reversal bar, narrow range but the same heavy volume as the previous wide bar. Supply is coming in. Then 4 bars with up-down pumping action, more evidence of supply. But we scurry to a new high. Probably a short covering rally and for all the fear, we are only 1% above the previous high. Now I was looking for evidence the demand from pained shorts had diminished. The 10:45 and 10:55 bars caught my eye. As if I had not thought my previous thought, I was musing how could we run out of demand here? I cannot believe it. Seeing how it just hung around no one else could either. Then I remembered the words of a legendary s and p trader, tops and bottoms are a lonely place. At 11:00 I pulled the trigger. The ease of movement down at 11 and 11:05 confirmed my opinion. Prices fell until noon and I noted the inability to rally until 1:00. The heavy volume at 1:00 showed large supply above the market. Perhaps all those longs hoping to sell to us little guys when it crossed 100. The rally to 99.64 was very weak, further confirming our deductions---no demand at the top of a rally. The wide range and ease of movement at 1:55 was duly appreciated. The move probably would not start until the last hour. Another weak rally climaxing at 3:00 at a lower high with minimal volume. It is the last hour and no demand is kicking in. This rally to 99.63 had no follow through. In the next 20 minutes down bars seem to have more volume than up bars. We are meandering. At 3:25 I noted to my colleague, "this is not healthy." His comment a few bars later as we had loaded up, "Finally supply." 
