The S&P 500 Index (SPX – 1,071.25) finished with a gain of 6.4 points. One of the primary ways to identify a trend is by observing a series of lower highs and lower lows, in a down trend. That is very evident in the daily chart. Price stalled at the 1100 level. This can mean one of two things. It can be a sign of reversal, or it can be a temporary stopping point leading to continuation of the previous move. Friday brought the answer as developing market activity confirmed the overall weakness and turned price back down in harmony with the trend.
This is why it is so important to wait for confirmation, whether for a market turn or for continuation. The way things stand, Monday was a weak rally attempt after a strong selling day, and weak rallies lead to lower prices.
We have to go with what is known. Events may change tomorrow, or the day after, but until there is some obvious ending action, with the trend down, being on the short side of the market has been dictated by price and volume activity that says lower prices are likely, not guaranteed, but likely. Staying short until the market says otherwise, for anything can happen.
Market found a support at 1065 which is the 38% fib retractment level of this rally from 1010 to 1100 today. If this support hold and the rally resume, bulls will be cheerful because it usually shows the momentum is strong and market is healthy when a rally resume at 38% fib level. However I am waiting for 1055 which is 50% fib level.
I still holding SPXU, I will sell it tomorrow if S&P500 drop down to 1055, I will set a stop loss order at 1085 and I will attempt to long it at 1045 with extreme oversold and rebound.
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