S&P 500 - December 3, 2009

An action-packed start, a dramatic finish, and lots of nothing in between.

There is an old saying that says: Never Sell a Dull Tape!

Of course, the wise people who bestow upon us such nuggets of wisdom never tell us what time frame or market condition they have in mind. They don’t tell us what they mean by dull either. So it all becomes very subjective. I prefer to be involved from more an object point of view, I like to be able to measure it, and, as such, I try to look for setups, dull, or exciting.

Here’s a trade setup that shaped in the afternoon, and got activated soon after I posted prior to market close.


Main points of the trade above are the impulsive nature of the morning sell off, and the choppy, tight action of the afternoon. Good things about it were the range contraction, and availability of objective stop points near the break point.

Today, S&P gapped up, made a nominal high and was sold right away, filling the opening gap.


It spent most of the rest of the day doing nothing, and then broke hard to the down side filling another open gap in the 1100 area. There is yet another open gap in the 1070 area. So, as per text book definitions, today’s gap, the 3rd gap, might have been an exhaustion gap.

Some say that someone somewhere somehow knows about the employment number tomorrow and that’s why we got the drop -- just what I have heard here and there

This is 60-min chart


Only two types of players survive ranges like this: long term players who wait for the range to resolve, regardless of whether they have a position or not, and disciplined day traders. Other than those, some may get lucky, but most get chopped.

For a change, volume rose sharply.

Breadth was poor


McClellan Oscillator (MO) continues range bound around neutral.


Rally has seen less and less participation across the broader market since September


So things do not look all that healthy. And, of course, it does not help when nervous market players are dealt back-to-back bad news, first Dubai, and then contracting ISM numbers.

It is also a bit worrisome when every attempt to break above the 1110 is immediately sold as can be seen from the 60-min and daily charts above.

But, regardless of the news, and the job report, and the rest of the minute-by-minute hoopla, S&P is still in a tight range. If the bears are ready to take a role that would count to anything memorable, they should take the index below 1061 pivot and keep it there. As a start, let see if they can fill the 1070 gap or not.

This is a very dangerous market. Everybody seems to have figured it out that the play to fame and fortune in short USD and long whatever. As for the bears, they have no way of knowing when the real shorters of USD, those who print it, might tighten up a little. All I can do is be wary of the very obvious long side, pay attention to key levels, and watch for signs of distribution. Today was a distribution day. It needs a follow through.

There is no short term trend on S&P, just a choppy lateral move. Mid-term trend is up. Long term trend is down.

Support is 1091, 1061 (a tough pivot for the bears so far) and 1041. Resistance is 1107 (a tough pivot for the bulls so far), and 1133

Have a Nice Evening!