03Jan10:31 amEST

An Armed and Dangerous Market

The sharp selloff in shares of Apple this morning looks to more than offset any bullish hope for the BMY for CELG buyout to take the market higher. Similar comments apply to an initial bounce in crude oil, as well as weak ISM manufacturing data perhaps slowing down the hawkish Fed. 

In fact, the Dow, S&P, and Nasdaq have all taken out yesterday's price lows at some point today. But the small caps in the IWM ETF, below on the daily chart, have yet to do so.

Thus, keying off the IWM at $131.54 will be a big issue for me the rest of this session to see if another damaging leg lower is underway. 

As we noted yesterday here and on social media, as well as for Members, the IWM daily is sporting a fairly textbook bear flag pattern in the context of an ongoing downtrend. While this may seem a bit too obvious to come to fruition for ursine speculators, the reality is that sentiment still seems a bit disconnected from the actual weakness we are seeing.

In other words, many traders continue to underestimate just how armed and dangerous this market has been for longs, and may continue to be. The VIX has fallen a good ways down just in a few sessions and may be ripe to wake back up this winter, and there is not much to inspire us in the way of price action in former and potential future leaders. 

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