12.13.2011 -- Not looking good for a santa rally..

Not a real good close for the market today. It was a wide trading range that closed deep in the red.

We took out the bottom of the bollingers and now the only things standing in the way of a fairly big sell off is the 50 and 100dma's.

You might start to get some nervous longs here that were expecting the santa rally that see another day like today and only 7 trading days until Christmas and think that maybe we've already seen whatever we are going to get.

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Key Levels

Upside -- 1235-1240, 1255-1265, 1285, 1310

Downside -- 1221, 1208, 1180, 1164, 1121

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SPX Daily;

I modified the channels again. This is a pretty complicated pattern that can be drawn many ways. That large wedge, yesterdays fork, todays channels/fork. I'm not sure yet which one is correct, you could really fit all of them. So think of them all as just crayon scribble guidelines.

Right now, I think the concrete things to pay attention to are the bollingers and the moving averages. The rest is fuzzy at best, including EW as there are a number of possible counts both short term and long term.

So key for today is that we closed below the bottom of the bollingers. This typically can set off a cascade of selling where the market continues to sell off below them and stays below them for quite awhile as the bollingers rollover and catch up.

What could stop us is that the 50 and 100 are both within 20 points below us.

So if the market wants to use one of those as a springboard and fit in a santa rally, it can do so soon.

If we take those out however, all bets off and theres only 4 areas of support before the market would hit air and really fall off a cliff.

Another key item from today was that we were up quite a bit and put in a reversal and closed pretty deeply red. This isnt one of those classic days that mark tops where the market is up 250 and closes down 250 and marks a big reversal top... but it is a day we were up 100 on the DOW and closed down 70. We haven't had an intra-day reversal like that in quite awhile. Most days lately have been maybe a quick reversal in the first hour and then run with that direction the rest of the day.

Because I think longs may get nervous here with so little time left til Christmas and bad earnings from Best Buy and below concensus retail sales data.. I think we are about to embark on a selling spree here.

GL

CJ