S&P 500 - March 19, 2009

charts courtesy of stockcharts.com

The hangover after the party, the Fed party.

So, my instincts were not all that bad. Spikes like yesterday’s are very often, if not always, either caused by distressed emotions of badly burned shorts or by forced liquidation due to margin calls placed to none other than badly burned shorts.

Do you remember the jackass bubble-shout predicting DOW 5000 just a short while ago? What a crook!

I hear that bubble-crook-in-chief was calling Mr. Feddie Chairee the real deal yesterday, saying in Ben he trusted.

Whatever!

I took most of the profit at the close. It may have been premature, and this rally may have seen its end, but there is always another time for another trade. Also, this last bit of a run may extend further, especially, since tomorrow is the final day of the quadruple witching for scam artists of all markets to showcase their games and plays.

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Index pulled back on above average volume. Breadth was negative but only slightly so.

It’s too soon to read anything into it other than a consolidation.

On the 60-minute frame, we see the index appears to have rolled over with negative divergence in place.

We also see that the gap of the 800 area, which we identified as an area of interest weeks ago, held yesterday’s spike in check. Will the index spike one more time to fill the gap? Or will it succumb to diverging momentum? Your guess is as good as mine.

If we take a look at put/call ratio, we see very low readings indicating possible extremes in bullishness

After such a strong run, this kind of low CPC reading may indicate some herding on the long side.

And this is the equity only version

Many technicians pin a lot of hats and coats on CPC. First off, sentiment indicators can frustrate you to no end before doing something useful. Secondly, there is not an easy way of saying if a low CPC reading is because of bought calls, sold puts, or just hedges against other positions. Still, with extreme reading, it’s a good idea to treat it as an early warning device. A change in its directional move is more important than an arbitrary number.

A lot depends on how many bears are still left standing. The more killed with yesterday’s spike, the better the chances of a pullback soon.

Here’s the 15-minute chart with potential retracements

I still do not have a confirmed mid-term uptrend. The strength of the move from 666 low suggests that we will get an uptrend but that is only a technical suggestion. It will take a lot of heavy selling to completely turn the tide on this rally.

I personally will not go long here regardless of what Feddie Chairee may do or what bubble-crook-in-chief may say. I do not want to seriously commit on the short side either, not yet. So, it’s trading and/or observing for me till further notice.

Long time readers may remember that on many occasions I have said that it’s not over until the fat cats say it’s over. The pullback, when it comes, may tell us if they have made their decision for this round of market mayhem or not.

Short term trend is up. Mid-term trend is down. Long term trend is down.

Have a nice evening!