S&P 500 - September 24, 2009

A second day of selling.

Volume was below average. Daily breadth was worse than yesterday.

In two days, S&P has shed 30+ points. I though US market was not suppose to have negative days. Just as bears started posting capitulatory (is that a word?) material (I showed a sample the other day), S&P dropped 30 points.

McClellan Oscillator does not look good. Given that the volume of the decline has been just so-so, it may get further down, at least to the uptrend line, before we see a good bounce. That’s just a guess on my part and nothing more.

Our current count is on track. I still think we are in a minor degree wave 4


And I still think 1040-1050 should hold the drop. Now, you and I both know that market does not care what I think. So, if index drops below the top of minor wave 1, we will have two likely scenarios.

1. Index is setting up an ending diagonal for its minor wave 5
2. Index has topped for good and will go quite a bit lower
3. The current count is not correct and needs a review.

I will deal with scenario 3 when I have to. For now, I shall watch the short term action and see what it leads to.

This is a 15-min chart

I have circled an area that I think might contain the action if I am right with my assessment that 1040-1050 will hold this leg down.

Notice MACD has dropped to the level of September low. If index is indeed going to maintain it mid-term uptrend, this should be the low in short term momentum, followed by some divergent low or choppy sideways action.

Of course, this is all in my head and may prove to be nothing more than useless chatter, but that’s what I expect – pending market action.

It seems like my casino play of shorting the Fed spike was an OK bet. I have taken profits, and lowered stops.

Nas100 sold on average volume

Here, also, I have circled an area that I think might contain the drop. Looking at the weekly picture of Nas100

Barring a crash out of nowhere, this is a chart with a lot of support from the 1650 area, which I think corresponds to 39-40 on QQQQ.

As for S&P, how about this chart as a road map?

Let’s Wrap Up:

S&P is close to short term support zone, a bounce may happen soon

This drop has not been accompanied with garbage bond ETF, HYG – Not yet, anyway

Resistance is 1061. Support is 1050, 1041, and then 1018

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

This is not a run substantiated by hard-core, blue-collar, non-governmental, honest-to-goodness econo-data -- Not yet, any way. So far, it’s been a run made by printing money, bloated-and-bloating national balance sheets, constant propaganda, and super computer purchases of ETFs and Future contracts at critical junctures. The intent seems to be to get every saved dollar either invested or destroyed. The run may go on forever, or cease any moment. The econo-data may come. Still, market seems to be pricing a hell of a span of earning expansions. Having large, unhedged/uninsured positions (long or short) is, IMO, playing fast and loose with cash.