Crazy is almost a side effect of Genius

Luckily, in my mind, Michael's crazy period wasn't long enough to destroy the memory of genius. The music lives on forever.

The New Downtrend?

Somehow I don't think the last series of tops (950, 920, 910) are going to define this downtrend. A couple of posts ago I was hoping for a series of lower tops to define the downtrend's rate of descent, if you recall.

At this point, a break of 888 would strengthen that thesis. The alternate thesis I would expect a bit more is a trading range starting to form (sideways for the summer??) btwn 880 and 920. That would be a nice set of trades.

I'm expecting a bounce at 880 and hold 910-920 to be the big resistance.

Maybe daily is too frequent an update

Especially on days like yesterday... you can't even see it on the chart above! (without clicking on the chart to see it full size)

Same levels, expecting a hard bounce off of the 880 area, with 900 minor and 910-920 major resistance.

Today's verbiage from the Fed just got even more anticipated, given the Swiss situation.

So far, so good

The drop has been relentless, and the 880 area looks like a done deal today. I'd expect a modest bounce at that point, to 905-910 or so. Today's market behavior in the first hour, and the internals all day will determine if we see the bounce and how high.

Interesting thought

(click to see full size image)

I was reading the comments on one of my favorite trading related blogs, www.slopeofhope.com, (a favorite more for the community of commenters than the excellent blog itself) and one of the comments struck a cord. It postulated that the market's recent rally from March had one characteristic in particular that might be repeated in this new down-leg. It is that there were few opportunities to 'buy the dips' before the bulk of it was over. And this bear leg may just have the opposite, where everyone waits for an opportunity to sell or sell short, and it doesn't appear for a long while..... it could.

Back to today, I am stunned at the strength of this selling. I was expecting a bounce to be a little stronger, and I find it hard to believe Friday's high is the next lower top, but now (at 10:40) that the low of last wk has been breached, it might be.... we'll know in the next bounce if these peak's will define the downtrend.

I don't think it will, ultimately. The rally off the lows in March started with a very steep climb, but the sustainable trend was defined later in the month at more reasonable rate of assent. If this bear leg does the same, then the rate of this first descent will moderate and the sustainable trend will be defined later, with a slower rate of descent.

Still waiting on 880-890, with a first bounce to ~900-910.

Defining the downtrend

Today's rally has stalled below Tue's levels, close to the 930 level mentioned yesterday, and there's a small chance that it goes as far as 940. I'd have to revisit my entire premise if that level gets taken out.

In the meantime, this bounce to the 930-935 area could very likely be the next lower top, starting to define the downtrend, very preliminarily.

Still looking for 880-890 soon.

Ditto

Yet again this morning, so far, 920 established itself as an important resistance. The next level is now 930, in addition to the formidable 940 mentioned yesterday.

The recent weakness suggests a revised target near term of 880-890. We almost hit 900 yesterday, but I'd suggest we'll get closer to 890 soon.

When it ABSOLUTELY has to be there....

...you send the message by Fedex. And the refusal by Fedex to give guidance on the year, due to lack of visibility, is a message that says it all.

I love the idea of using delivery of goods as a real time proxy for the economic activity of this country. Sadly, that's not a green shoot right now.

Anyway....

When a trend has been broken as forcefully as this, especially given the strength of that trend, it helps to looks at a longer term picture of the market to determine likely ranges. Normally, that longer term might be 3-5 years, but in this case we're in such uncharted territory (get it? uncharted...haha) that a one year look is all that could be relevant.

(click any chart to see it full size)

It's obvious that the 920 area has been an important point for this market over the last year... except for a day or so, it acted as a ceiling for the market before a major drop, and then on the recovery, in May, of that drop. After acting as a floor for the last couple of weeks, it will now act as a resistance, with 940 being a very important resistance level.
The near term target is 890-900, as posted a couple of days ago. A bear's dream would be to have 880 taken out, but I doubt that happens before we test 915-920 again....

One day doesn't a trend make

But it sure can break one!

Differently from the day-long breaks of May, this one added a break of nearest support. Today's market rally should stall out at 930, with a smaller chance to go as high as 940...

The next step overall is to look to define a downtrend, similar to the recent bull run, though that won't happen for at least a week, since it will take a lower high (than 955) and a lower low.

Finally, (maybe).

The good thing about trends is that they can't last forever.
This might be the day where we break the lower trendline, and stay below it for the day. Of course we did that for a few days in late May, only to resume this bear market rally.
Valuations and the good news crescendo in this instance leads me to believe this trendline break will be the one to end the bear market rally and start to establish a new downtrend.
Once the 920 level is breached, I'd expect the near term target to be 890-900. If...

Another brick

Yesterday's breakout found no sponsorship and failed.

If we spend the day below the bottom trendline at 940, that would be a nice positive for bears.
It would bolster the case, along with employment figures, retail sales, energy prices, huge govt debt, rising rates, etc etc etc....

(In case it isn't obvious, the chart above is the SP 500 in 1 hr bars, from Jan to present.)

Thumb twiddling

Nice little tease by the market - briefly breaking the downtrend is not enough, we need to close below it. Even if it did close below, its too late to confirm the breakdown from late May, in my opinion - we'd need to see more weakness to raise confidence on the trend change.
One day the break will happen and we will be looking for the beginning of the downtrending bear market to be defined.
Today, anything below 935 would be a positive for bears.

The Problem with Trends

The problem with trends is that they work till they don't. And this one is still chugging along while most of us are expecting a break.... any day now.....any day.

So, still waiting for a trend break. Bounced off bottom trendline, today making another attempt to break out from the 952 resistance - maybe this time it doesn't FAIL and bounces down from the midline at ~965.

Anyway, the bottom trendline at 932 is the one to watch for....

Fail

That possible run to 950 happened, and FAILED.
Today's drop at the open will either bounce off the 925 uptrend line, or break it - which frankly is overdue....

If so, the next support range is 900-920, which if / when it fails would call for 880. I won't even go into the next level on a break of 880, yet.

This market is taking the bull side

Well, what the market didn't do yesterday (hit 950) it's going to do this morning. Each day that the market stays in this uptrend makes the breakdown last week more suspect.
Today's action could stop in the 950-955 region, the next stop is either the top band at 980ish or back down to the uptrend at 920. The bears (like me, since I see the market as overvalued) would need to see a break of 920 soon!

Same question, next day

Yesterday was a successful test of the 920 uptrend and today will be a continuation day to the uptrend, since markets will rally at the open.

Today could answer the question, depending on how it does in the 950 region, which is the short term resistance level. Again, waiting for a break of the 920 level to confirm what might have been the beginning last wk of a new bear leg down to the 800 area, which I believe would be a first target.

Probably best said by Dr Brett, one of my favorite blogs on the Interwebs :
http://traderfeed.blogspot.com/2009/06/preopening-briefing-maintaining.html

Is last wk's SPX break real?

Watch the drop to 920 as an indication of whether the break in trend last wk was real... this tells us whether we're in for a bear leg or continuation of uptrend.
(click the chart to see it full size)