S&P 500 - March 3, 2009

charts courtesy of stockcharts.com

Market churned around the 697 pivot on above average volume.

Index gapped slightly at the open, following the positive lead of the future market, but it soon turned, filled the gap and traded a narrow range for the day.

Volume was above average, but less than yesterday, breadth was not good. This was the 5th day of selling in a row, and yet another day of NYSE having net new lows.

Not much has changed since yesterday.

The counts from yesterday are still valid.

This is a 60-minute chart

With market oversold on multiple frames and some divergences building, one would expect some sort of a bounce.

While steady selling continues, VIX is happy in its cage.

As Donna, one of our readers, commented, there is a lot of talk of crash thrown out there.

Yours truly singled out the orderly nature of this decline early on (you can check back) while people were busy making bounce predictions from this support level or that. Now, orderly is the favorite adjective of quite a few pundits. What took them so long?

Who cares?

What we should care about is that this kind of incessant selling may bring about a day of fire sale wash out.

It happened prior to the crash of 87.

If we think about it, it just makes sense that at some point many hopeful souls will finally give up? So, as long as selling continues, and indexes do not firm up, the danger is there. As I have mentioned before, the market has the potential to collapse on complacent heads that stay indifferent to all the selling. On the other hand, there is the potential for a good squeeze up.

If the collapse and the washout happen, it may finally get us rid of all these bottom callers, and basing period aficionados, and give the market a platform from which to stage a substantial rally.

If the momentum and breadth divergences win the battle and market rallies, it may still have enough residual bullish sentiment in it to hamper its advance.

I have no idea which way it will turn, and as such am happy to be a more or less neutral observer. Let the brave do the fighting, I will try to show up for the medals.

It’s like skating on thin ice, if you make it, you get to brag about it. Me? I like to look at the winter from the inside of my warm house ;-)

Long term trend is down, mid-term trend is down, short term trend is down.

S&P is at 696 pivot, to the down side we have 644, and to the upside, we have 717, and 734.

Yesterday’s post has a weekly chart of S&P 500 that had incorrect theoretical target for Intermediate 5 = 1.618 * Intermediate 1.

My apologies. I have corrected it here