06.22.2011 -- Still in the bollingers for now..

For those who don't like reading my babble about events surrounding the market, here are key levels, aka prime reversal spots;

Upside 1301 (Mid-Bollinger), 1316-1320 (50 and 100 dma's), and 1330 (top of bollingers)

Downside 1285 (2 important trendlines), 1275 (bottom of bollingers), 1261 (200dma)

Apparently the market thought Ben was going to announce an extension of QE2 or something today as it didn't like that fact that he lowered his economic forecast and basically said the economy entering a period of stagflation. Stagflation is a economic state of stagnated or shrinking growth and rising unemployment and inflation.

All Ben is gonna give right away is some more QE lite after the end of the month. I guess that combined with a forecast of stagflation is not what the market wanted to hear. Go figure.

Here's what the market heard from that entire thing...

"Conditions are worsening and I'm doing less about it"

My response would be... well..what did you expect? Did they really believe that Ben could mount another campaign of 600 billion dollar monetizations while Congress is in a budget war?

Some interesting things today, but only 1 chart.

First off, most sectors and indexes (or is it indicies, i never know) closed still well inside their bollinger bands. The S&P closed directly on a couple converging trend lines, but that said another large sell off that puts the S&P, Russel and DOW back under their bollingers could be a real problem for the market.

The futures are looking pretty ominous right now. I would tread very lightly here though as we are heading into end of month and end of quarter.

If we do sell off tomorrow though and the S&P closes back under the bollingers, we are likely going to test the 200dma again and the market will have some real problems on its hands. Hard to believe that is "allowed" to close out a quarter with a technical breakdown. It would be a rare occurance to have the market break down right at quarter end when there's usually window dressing going on and a very dangerous occurance as it would mean everyone is saying screw the quarter, I want OUT NOW.

The only other thing of interest today is that while still well within the bollingers and not in technical danger quite yet, IYR and the Transports put in some nasty looking reversal candles today. Candles are just one of those little things that add a bit to your probabilities but they are some ugly candles.

Here's the chart showing our key levels and why the S&P is in technical danger if we get another decent sell off tomorrow;

If the futures keep this up, we'll obviously open below that trendline support, then we have the bottom of the bollingers there. Below that is the 200dma and then that's it, below that is air. Probably flash crash land.

If the bears were going to avoid a trip back to highs, this had to happen and tomorrow needs to be another ugly day. If we get another ripper north and put in a higher low over the next couple days, we'll be off to the races.

GL

CJ