1. Dow within reach of 200MA:
2. Nymo and Vix:Vxv both still calling for a bounce:
3. Put call ratios leapt up on Friday, also suggestive of a bounce imminent:
4. Capitulative Breadth (CBI) hit 10. This has been a fairly reliable indicator in the past of a low being in within 3 days. See the table below which shows incidences up until 2012. Also note some drawdown before the bounce was fairly typical.
5. Thursday was a major distribution day, a typical signal around market peaks. The chart below shows there have been 4 major distribution days (red>9) and no major accumulation days (green>9) so far in 2014:
To sum up, Friday’s action further cemented the change of trend, and does set up the potential I referred to for a big down day on Monday (end of week selling, weekend worrying, Monday panic). However, there are several indicators shown above calling for a bounce or a low. If we look at the orange bars on the put-call chart and the common drawdown on the CBI table, maybe we could see some significant selling on Monday followed by either a recovery later in the day or a recovery Tuesday/Wednesday. If instead the market bounces strongly from the outset on Monday then I would be looking for some kind of retest of the breakdown that eventually fails and a chance to add further short during the course of next week.