Tomorrow could tell us a lot
Early strength faded today as I expected it would. The S&P never touched 740 but did reach near 732 before weakness set in. That's a fairly typical pattern after a big up day. The market tries to extend further the next morning but is too stretched short term and gives it all back by the close. You can find pretty good intra day shorts in those setups.
The other alternative was an early morning smack down by the bears. If that had occurred it would probably have reversed as well, especially if it had approached 700. There are lots of traders that would have stepped in.
The next day or two will be telling. The bearish case is for a move tomorrow or Friday upwards to the critical 740 level that gets sold hard and restarts the downtrend.
The bullish case is for any further weakness towards the 700 level gets bought hard and another massive up day appears and takes out the 740 level. It would then be tested from above, hold and then "happy days are here again".
I actually prefer the bearish outcome right here for several reasons. One would be that I'd like to see this triangle fill it's projection, or at least come closer than it has so far. That would show me that the market was "technically reliable". That's my own saying by the way. It simply means that the market is acting predictably and I can have more faith in the patterns and indicators. That's not always the case.
I'd also like this bottom to come on a number that at least appears to have some significance. 666? There's only one thing I can think of that this number represents and it isn't good, nor does it relate to any market pattern or retracement level I'm aware. If you've got one please send it to me.
602 is about the 61.8% retracement level for the S&P from the top. Also there's support at 600 WAY back in like 1886...I mean 1996. Either way it's been a while.
There's one thing that makes me think the bearish case may win out here...the credit markets. I've noticed weakness lately in the LQD and the HYG and the senior secured bank loan funds, like EABLX. That can't be a good sign. We'll see.
In any case, even if the S&P breaks down to 600, or even 550 from here, it'll reclaim these levels in short order once it hits bottom. So if you have small intermediate term positions you just bought yesterday or today, you should make money eventually as the rebound occurs....I hope! Sorry. No guarantees in this business, just probabilities.
The other alternative was an early morning smack down by the bears. If that had occurred it would probably have reversed as well, especially if it had approached 700. There are lots of traders that would have stepped in.
The next day or two will be telling. The bearish case is for a move tomorrow or Friday upwards to the critical 740 level that gets sold hard and restarts the downtrend.
The bullish case is for any further weakness towards the 700 level gets bought hard and another massive up day appears and takes out the 740 level. It would then be tested from above, hold and then "happy days are here again".
I actually prefer the bearish outcome right here for several reasons. One would be that I'd like to see this triangle fill it's projection, or at least come closer than it has so far. That would show me that the market was "technically reliable". That's my own saying by the way. It simply means that the market is acting predictably and I can have more faith in the patterns and indicators. That's not always the case.
I'd also like this bottom to come on a number that at least appears to have some significance. 666? There's only one thing I can think of that this number represents and it isn't good, nor does it relate to any market pattern or retracement level I'm aware. If you've got one please send it to me.
602 is about the 61.8% retracement level for the S&P from the top. Also there's support at 600 WAY back in like 1886...I mean 1996. Either way it's been a while.
There's one thing that makes me think the bearish case may win out here...the credit markets. I've noticed weakness lately in the LQD and the HYG and the senior secured bank loan funds, like EABLX. That can't be a good sign. We'll see.
In any case, even if the S&P breaks down to 600, or even 550 from here, it'll reclaim these levels in short order once it hits bottom. So if you have small intermediate term positions you just bought yesterday or today, you should make money eventually as the rebound occurs....I hope! Sorry. No guarantees in this business, just probabilities.
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