Market Head Games

As I detailed in one of my posts yesterday, the market has a knack for turning the expected into the unexpected.  After several quarters of the market climbing a wall of worry on low volume, technically shaky bounces after sharp corrections, many traders went on tilt and shrugged off the idea of shorting in the face of a bearish setup.  I believe the crucial difference now is that within the past few weeks we have regained many or all of the losses from the 2008 crash.  The wall of worry became awfully slippery the higher up we went.

This time around, bears and heavy cash holders have been rewarded with a market that was set up technically very bearish, and followed through accordingly with price action and volume.  As I am writing this, the $SPX Is off 2.28% at 1131, as we have lost several key levels of support.  Because of the ferocious nature of the selling since 2 p.m. yesterday, I have not had a chance to add to my 1/3 positions in my three inverse ETF holdings–$SKF, $SDS and $TZA.

The 30 Minute chart of the $SPX indicates that we may have more room to fall from here.

Look for possible support at the 150 day moving average at 1124, as well as the 200 day m.a. at 1100.

The Euro also remains under pressure, and if it cannot catch a bid here, it looks as though it will fall back to where it was at its inception.  Here is the monthly chart.

Eventually, we will see actionable swing trading setups on the long side.  For now, however, many charts are either broken or are in the process of breaking down.  Thus, resisting the urge to bottom pick is important.  Likewise, given how much selling we have seen in the past twenty hours, initiating or adding to short positions is probably not a good idea at this point.

Hence, patience and a heavy cash position reign supreme.

If you enjoy the content at iBankCoin, please follow us on Twitter