We are at one of the most important junctures of this bear market.
Gary over at The Smart Money Tracker has an interesting article relating to the 950 level on the S&P 500. Some of the salient features of his article with respect to this level are:
- It acted as support during the September 11, 2001 terrorist attacks
- It acted as support during the 1998 LTCM crisis
- It acted as resistance during the counter trend rally in January 2009
- It formed the breakout line that initiated the bull market 2003 - 2007
The only way this market is going to penetrate this incredibly important level with lasting results is by finding genuine buyers to push it through, but it simply can't occur (again, on a lasting basis) without a pullback. The caveat, however, is any pullback - and the bulls likely know this - is going to be a massive wave of selling and its going to require a lot of conviction on behalf of new buyers to buy that 'dip', particularly after the 40% run-up we've seen since the March lows.
The market at this juncture resembles a roller coaster at the top of its peak. Both volatility and volume have come in tremendously and my now infamous divergent A/D ratio chart is even more divergent. There is always calm before the storm and right now things are more quiet than at any other time in the past several weeks.
There are no surprises, for the most part, to the upside anymore. The end-of-day buy programs are simply not as shocking as they were even a few weeks ago. Both bulls and bears have reached a level of, not only acceptance, but agreement that buying dips is the way to go and a breach of the SPX high at 951.69 is a CLEAR indication that we are off to the races.
This to me absolutely screams a top.
This being said, I'm going to make a prediction that we hit 900 before we hit 960. I typically don't like predictions since it can have unwanted unconscious effects on your trading but I also like to stick my neck out from time to time.
I expect the rest of the week to be lackluster and gyrate around the 940-945 area.
EDIT: Today's small change in the McClellan oscillator suggests a large price move tomorrow. Looking at current futures, seems big move will be to upside - time will tell however. A break of 950 on good volume will be a welcomed sight...we're all tired of the price action as of late.
2.- TODAY'S ES TRADING
I wanted point out another great example of today's ES trading and the rationale behind one of our long trades.
I blogged about the The Power of 9 - that is, the preponderance of intraday impulse waves to be approximately 9 points in range. Today was such a great example of this.
Note the oversold RSI(9) around 8am PT (11am ET) and the 9-point range of the previous impulse wave (945 to 936). When a cluster of indicators come together like that, they make for incredibly high probability trading.
