S&P 500 - Feb 12, 2009

charts courtesy of stockcharts.com

I have been writing, wondering when bears would get their whipsaw. They got a good squeeze today. The thing with a maturing trend is the sense of entitlement exhibited by those on the right side of trend.

Some bears are really fuming, calling the markets rigged, calling the late rally the work of mysterious purchasing agents of the future markets, and so on.

I am not arguing for or against any such arguments. All I have to say is: tough! Get over it!

A few days ago, bulls had a breakout that eventually failed and turned their profits into ash. Today, bears got a breakdown that later set fire to positions established on the breach of the so-called running triangle that has been the talk of the world.

Here is a look at the world-famous triangle and what it did to some bears today

I had some better things to do today and was not watching the market action. After the fact, when I looked at charts, I saw this on a 15-minute chart.

Let’s not get bogged down with the degree of waves. Larger picture is still unresolved and open to various wave interpretations. Instead, let’s concentrate on the action down from high of February 9.

It looks like 5 complete waves. Yes, the retracement came fast and furious, like the running of bulls in Pamplona.

But that, in a way, tells us that there may have been a lot of short positions on very tight stops, probably established not too long before the bull attack, and not from a lot higher up.

Let’s zoom in the market's late hour action

Again, let’s not fume over wave degrees, and bear in mind that this is a 1-minute chart.

We should get a pullback soon, and depending on how it pulls back it will tell us if what we have is the beginning of a larger rally towards the top of the range or just a normal intraday correction to 5 complete waves.

And let’s bear in mind that this is futures chart, and the situation may be resolved in the futures price and only its continuation may manifest itself in the cash price.

Yes, it is not easy to be a trader.

Today was technically a reversal day for S&P (not the DOW), whatever that migh mean in this age of chop-chop. Breadth was not all that hot.

Notice that, despite the late-hour fireworks, some breadth measures stayed negative

As I have mentioned before, on the daily chart, index has a lot of room to go, meaning that it is not overbought. Now that the 60-minute overbought conditions are resolved as well, there might be a play back inside the range. How far up? who knows? But if todays's break below the range were a good one, Feb 9 high should hold.

One negative was that the DOW could not manage to drag its heavy body above the widely-watched 8000 level. Another negative was that Nas100 was selling hard in the morning and that kind of vulnerability, if continued, is not good news for the bulls.

I have said this before: There seems to be a lack of conviction by both bulls and bears. By that I mean deep pockets, real money that can influence the market. And as long the absence of conviction persists, markets will chop around and destroy trader’s capital on both side of the track.

The mid-term trend of S&P and the DOW is still down. 850 is a must for the bulls to recapture and hold. Bears failed at breaking 820 yet again. So, we'll watch those levels for now.