Market Update 12/08/09

 

Today’s sell-off is the 4th foray below the 1090 area in the last 3 weeks. The SP-500 is sitting on its lower regression channel trend line which held a previous test (the 1029.38 pivot L). Generally when an area that has been support multiple times fails, it sets up a pretty big pop to the downside. If we break the last pivot low of 1083.74, a move to the 1075.39(call it 1076) 1.23 fib extension below the post Dubai rally should be a slam dunk

I will take some SPY put profits on a follow thru of today’s sell off into that area. This area is also the 50 retracement of the rally from 1029.39 to 1119.13. That fib confluence is logical place to take some off the table and hang in there for a larger move with a stop on the remainder at break even.
I am playing for a larger move because:
1. The market has been locked in a tight consolidation for three weeks, which usually culminates in a large move.

2. The major negative breadth divergences discussed in these previous posts-

http://marketkinetics.blogspot.com/2009/12/breadth-divergence-still-intact.html

http://marketkinetics.blogspot.com/2009/12/market-update.html

-is still intact and has not been resolved in a major sell-off. (Yet)

However, the trend for 9 months has been, don’t stay short for too long. With that in mind I will go with my indicators and stay short until they tell me its time to go long or the stop gods hit my trail.


Good Trading

KW