It's a mess out there

It’s a mess out there. The Euro is acting like gold in the depression by forcing discipline - austerity when the opposite is needed. This is creating great violence within the capital markets and fear among traders and investors.

This is an international debt crisis, thus, capital will seek quality. As a result, the dollar, gold, and until recently why stocks have risen. I see nothing altering these flows until perception of the debt crisis returns to the United States or last man standing on the fiat block.

While stocks can violently correct from the April highs, it is highly unlikely that this will be the “highs” of this cycle.

A study of support and trend energy reveals some subtle clues as to the trend and the force behind it. The “Flash Crash” lows on 05/06 tested the 2/05 gap, or previous correction low zone on strong volume. This implies that the support zone will be tested again. The downside energy must dissipate before a bounce can materialize. Today, 5/20, the lows are being tested again on what appears to be lighter volume. This cannot, however, be confirmed until the trading day ends.

A test of the support zone and close above it on lighter volume will generate a bullish setup. There could be many bullish setups before a bounce occurs. A break below the support zone on increasing volume supports a continuation.

One indicator of interest is the REV(E). This represents the cumulative trend energy. Thus far, the REV(E) remains well above the previous correction lows (white circle). A pattern of higher highs and higher lows reflects increasing trend energy. I will be watching this closely.

Also, cumulative momentum, MOVB(E), is reaching into the extreme. This does not necessarily imply a turn is imminent, but it is often a precondition when volume and time support it.

S&P 500 and NYSE exchange volume: