While Friday's late-day 'buying panic' [2] is the exception that proves the rule, the intraday performance trend of the stock market often gives clues to possible directional changes in the overall trend of the market. As Gavekal explains, one way to measure the intraday trend is to count the number of weak closes over a period of time, and the following chart shows, that trend of weak closes has shot up over the past few weeks to its highest level since 2012...
[3]
Gavekal define weak closes as days in which the closing price is within 25% of the intraday low. [4]
The last time the indicator plunged this fast was into the 2011 market tumble.
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And that is happening as earnings expectations - the mother's milk of stocks - are getting smashed lower...
[5]
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And that is happening as credit markets are flashing as red as they have since the financial crisis began...
For the broad market...
[6]
And for financials more worryingly... 11-month highs in US bank credit risk
[7]
Of course, it took a while last time for stockholders to get the joke too...
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So to summarize - internals are collapsing, earnings expectations are plunging, and the credit cycle has turned... BTFD in Stocks?
