Key Levels;
Upside -- 1176, 1239, 1276
Downside -- 1102 (what we will now refer to as "the bottom" for now)
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Before I get to charts, there were some good lessons learned the last few weeks;
1) Bull rallies take years, massive selloffs happen very quickly. You have to be on the train before it starts moving or you miss it.
2) 3x ETFs slippage is massive. We'll use TZA (3x inverse of Russel 2000) as an example. TZA hit a high today of 69$. IWM hit a low of 63.79. Last time IWM was at 63.79 was 09/10/2010. At that time, TZA was at 96$. For a 1 year slippage loss of 30%. ... if you go back further its even worse, on 01/04/10 IWM was also right around 63.79... TZA on 01/05/2010? 143$. Get it folks.. DO NOT hold these things long for long periods of time, you lose. If anything, short the opposite. Dont go long TNA (for more than a few weeks).. short TZA and vice versa.
3) Bear market rallies will rip you a new asshole.
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Charts;
SPX Daily (25 year)
We appear to have bounced off the long term uptrend line you see here. That indeed is powerful support. You can see it stopped the 2000 bubble pop, but it did not stop the 2008 selloff. It has stopped us here temporarily, but I believe we will break it, its just a matter of time.
SPX Daily (3 months)
So here's our short term picture. We closed just below the bollinger bands on the daily. I have to think that we're probably going to climb back in them, but maybe not before some additional selling. However, if we break back into the bollinger bands at any point, the target becomes AT LEAST 1239, and more likely we may test the 200dma.
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I want to talk overbought and oversold for a bit. Obviously, as I've mentioned before, being oversold/overbought doesn't mean a whole hell of a lot in these types of moves. They can just keep becoming more and more extended, as we have seen.
However, they are still of some use to us. Pay attention to the overbought/oversold indicators in the following charts.
This will be a lot of charts.. but its necessary to display to you my opinion here;
S&P 5 Minute chart;
We are obviously extremely overbought on a 5 minute chart. So on a very short term basis, we may see some pullback here, but because this is a 5 min chart, the pullback could last less than an hour.
SPX 10 min.
Also very overbought. So again on a short term basis, we could have a pullback here soon. But again, it may only last a couple hours now.
SPX 30 min.
Ok. Here we are becoming overbought, but we are not quite there. So we have room in a 30 min chart for more buying. So now what we have is a potential pullback that lasts a couple hours.. followed by several hours of more buying.
SPX hourly
K folks.. what do we have here? The hourlies are JUST starting to turn up off very oversold. So now what I think may happen is a couple hours of pullback/selling, and then now another round of buying that may last several days to a week or more.
SPX Weekly
Now what do we have? The weeklies are in the middle of a fall and have more selling to do. So now what's expected is about a week or so of buying, followed by more intense selling that lasts in terms of weeks to a month.
SPX Monthly
And the monthlies. The monthlies JUST STARTED rolling over.
So what do you get from all that? You get that we are likely to see a rally that lasts up to a week or so here, but then quickly heads south for another round of major selling that lasts several weeks. After that, we likely will have another bounce at some point and will have to re-visit this exercise again to time it, but overall the monthlies say this market will be heading in a primary direction of down for a long time.
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No death cross yet, but its very close. I think we have one by end of the week unless the S&P rallies some 200+ points in a few days.
GL
CJ
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