Wednesday, July 29, 2009

10 S&P Points Available Below S&P 970

Remember our overall game plan here as we displayed last Friday [Near Term Roadmap/Plan for S&P 500] We're still in level (a), and it is obvious that S&P 970 has been the intraday floor the past few days.

Let's break the S&P up into segments which I always like to do. We closed at S&P 976... the first segment will be from (a) where we broke out from and above. I am classifying that around S&P 958. Resistance becomes support, so aggressive bulls want to buy here or on a pullback (assuming we are allowed to have one) to that level as they anticipate a bounce and then off to the races. I marked that with the top orange line below.

I believe if this S&P 970 breaks (by more than a hair of course) we have a great chance at a quick drop to that breakout level as discussed above. So we have a better than average avenue to 10 easy points between S&P 960 and 970 as we dance in between elephants looking for peanuts. We'll be positioning intraday appropriately if and when.

If this happens to play out (a drop to the "breakout level"), I'll be lightening up on the bevy of short positions I put on the past 72 hours since I'd expect the bulls to go by the playbook and make a defense of "resistance becomes support", and we get a cursory bounce there. The action after that bounce will tell me if we are heading to S&P 1000+ or beginning a correction.

All that assuming we break S&P 970 ;) Again I want to stress prior to 2007 I never focused this much on the indexes but in this new era (which I think I've finally adapted to) of computer dominated "student body left" trading, the index direction is 70% of the move. Individual equities mean little when ETF trading is dominant. That's my view, and maybe many don't agree with it, but my eyes tell me that is the change that has happened the past 2 years. I dislike it, but I can't fight it if that is the market we've now created, if I want to do what this website is intended to do.

Chart from Friday

Chart today

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