Today was a little wacky. There were some things that looked exceptionally bearish and some things that looked bullish. The market felt all afternoon like it was going to go into positive territory and it made several runs and couldn't get there. At the end of the day it sold off. Heavy heavy volume. I heard one commentator say alot of buying power was wasted and thought that was bullish. I was thinking throughout the day the opposite. Huge selling going on and it wasn't pushing the market down. Buying appetite came back in. Does this bounce have further to go?
Goldman was up 2%. Citigroup up 2%. JP Morgan up 1%. Small cap stocks as measured by the Russell 2000 were down 1.2%. Dollar down but precious metals slaughtered. Alot of divergences.
Big reversal off of the 200 day moving average at 1100. Bounce was expected but it was a big bounce.
Tons of headline risk over the next week. This Fin Reg bill is becoming important. South Korea and North Korea threatening war after South Korea declared the North did sink its navy ship. The riots in Thailand and the stock exchange actually being lit on fire. Germany and what is coming out to handle the European problem. Vote in the German parliament in the next couple of days. Euro manipulation and rumors of manipulation by world central banks.
The market the last couple of weeks have bounced between the 50 day and 200 day moving average. 200 day sits around 1102 and the 50 day sits around 1170 ish. Unfortunately that is a big swings as that spread is north of 6%. Whatever happens between this range I think you have to fade the bounces. Unless we break 1170 the bears are in control.
Tomorrow and going into option expiration on Friday are major unknowns. If we bounce I think you short into it. If we break a 1100 hold the shorts and maybe quickly short more.
If I had to guess today slightly favored the bulls in the very short term. 1125 to 1130 is possible in the S&P 500 but I am in no way confident we get that bounce. As much as we have sold off we are not that oversold. So we may bounce, I think the probabilities slightly favor it, but I wouldn't bet on it and if it happens I think you sell into it.