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As we count down the final trading sessions of 2011, the idea of playing the traditional bullish holiday season has led to many bulls finding themselves trapped in this market. Bonds and the U.S. Dollar continue to show impressive strength, which tends to bode poorly for global risk appetite, as per the correlations over the past few years. Moreover, the Euro remains under pressure and could easily be going sideways here before eventually breaking even lower. Again, this has historically put pressure on equities, as a whole. Global markets also remains under pressure, in addition to the spike down we saw today here in America, out of the bear flag/base I had highlighted earlier today.
However, it is important to not write everything off, just yet. Even if we close at the lows today, there are still eight sessions left in 2011, which is plenty of time for all kinds of moves to happen. Psychologically, it looks like the bears smell blood here in breaking Bank of America below $5, and you can bet they have the 1200 level on the S&P 500 in their sights next. Indeed, the key for me to stay away from longs was seeing the 1225-1230 level lost last week, and since then it has turned into tough resistance. Just as prior resistance turning into current support is an important victory or bulls, prior support turning into current resistance is a notch in the bears’ belts. And I am going to respect that until the bulls can reassert themselves again.
Amen
Not much to hang one’s hat on, but there is a very positive momentum divergence in BAC (and GS and JPM, etc).