08.18.2011 -- Hmmm.....

Market is playing games with our heads...

Key Levels

Upside -- 1169, 1199

Downside -- 1120, 1102

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This chart has no markings, it is only for visual reference;

SPX Daily;

You can see the bollingers did a little dip.. that little dip during the day was enough to move it from 1143 to 1140.

1140 was the max extent that I felt we could go if this was in fact a B wave of a ABC correction.

I like the price action.. I DON'T like the time it took. I expected to get this much movement down by sometime mid next week.

There's a lot of things that try to convince me that this isn't a B wave and that the "crash" wave has more to go;

1) Someone on the forum mentioned a lot of the growth stocks/momo's were hitting new lows.

2) Today was a hefty selloff. Not typical of a B wave. Would be more typical of this initial big wave down not being done yet.

3) Sentiment reversed rather dramatically there in just a week.

4) It would be hard to go short heavy right here.

O.k... but I will make some counterpoints;

1) The growth stocks/momos are putting in a new low with the market still quite a distance off new lows. That actually gives the market a chance to rally.

2) This wouldn't be typical of a B wave in a bear market, but I think in bear market, you really could get anything and have to think of it that way.

3) I don't think sentiment got heavy enough to the bull side to re-start a plunge. I want to see everyone feeling like the worst is over.

4) This one still bothers me... I have no arguments against that point.

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After careful contemplation and looking bad at the multiple bear and bull markets i've witnessed. I am sticking with my call from yesterday. We technically held the bottom of the bollingers on the daily because they shifted down on such a big down day. I think the market is tricking you with recent history into thinking we are going right back to plunging, when in fact we are going to potentially rip higher to 1250 to complete this correction.

This is a very touchy situation here though. A break of 1102 and obviously we are tanking some more. A close below 1121 would really make me reconsider.

Tough market here that is playing mind games. I would suggest you tread lightly. I will only go heavy here with a short at 1260 or higher and a long in the low 1000's.

GL

CJ