Momentum gap

Momentum (gap down), pullback, extend.  The picture-perfect "First Cross" sell signal today (First Cross sell being the slow line crossing zero and selling the first pullback in the fast line.  Interestingly enough, yesterday gave a near perfect mirror setup with a First Cross buy signal).

This has all happened before, it will all happen again.
There will be a time to position for long entries, but it will take some time (aside from intraday short covering rallies).
I use the 3/10macd indicator because it is closely derived from price and reacts quickly to price; all it does for me is help to take out some of the noise and subjectivity in viewing price.  The criteria I ascribe to the indicator's relationship of Fast Line to Slow Line is simply my way to quickly identify, and alert me to, higher lows or higher highs, trend continuation likelihood, range-bound markets, etc.
With that said, the 2b, 4c, or 4b criteria simply alerts me to a lower high or waning momentum.  In the chart below there's a 4c and 4b short setup highlighted:

or even this 4c criteria on the monthly S&P500 chart:

And more recently, this:

as an added bonus, the 2b criteria on the 3/10 macd isn't necessarily a lower high.  In the chart above the absolute high (prior to the shaded region) occurred while signaling a 2b setup (exhaustion of price/waning momentum).

Anyway, as we can see from the above chart, price confirmed a lower high and sold off.  At this point, the rallies will get sold and we will likely spend a number of weeks digesting the recent volatility to a point where a firm higher low can develop and begin a new intermediate trend up.  The question always remains; How low will we go?

To start with, take a look at this morning's opening gap down.  Price reached the 100% projection intra-day, while the 200% coincides with the August 9 lows.  Not to say price always achieves a 200% momentum projection, but the fact that it coincides with the lows is curious

As you can gather from charts posted on this blog I use two time frames for trade considerations; one which determines a setup criteria and a faster one which triggers an entry.  Typically I use the 15- & 5-minute time frames, but I also like to gauge what higher time frames might be setting up for (see yesterday's post), especially the Daily chart.
So, here we have the SPY daily chart split with a 130 minute chart (there are 3 130-minute bars in a Daily bar, just as there are 3 5-minute bars in a 15-minute bar, preferences are your own).  The reasoning behind this is that the faster time frame can help me to enter in anticipation of what I am looking for the higher time frame to do.
For instance; in the chart below the daily (left) set up a 2b short entry back in July, but in order to anticipate this trigger you can look to the faster time frame where the histogram turning red triggered an early entry as it was hinting at price weakness (vertical red dash line on the 130-min chart).

 So, what we have in the current scenario is a pullback of the previous momentum.  Out of this pullback we typically look for (anticipate) a re-test of the lows (which can often form a momentum buy divergence).  We're essentially looking for the faster time frame to turn red, leading us into the triggered continuation move lower.
Keep in mind, this is OpEx week and just because a trade may trigger an entry doesn't mean you shouldn't be suspicious should price fail to move in your direction within a reasonable period of time.
Meanwhile, here are some that triggered at the close today, so we would be looking for a continuation move of some sort.
IYT - failed overhead gap fill looks weak, may look to re-test $79 area

SMH -trigger bar is a re-test of the bearish momentum bar that precedes it- possible move back to $28.25

XLF - Barely turned red but hasn't exactly caught a bid. 

Remember, these are triggers to setups, and anything can happen so manage your risk.  They are also based on a time frame which is more in line with holding times of longer than one day.