Today, the SnP500 broke below the May 5-th low that encouraged the short sellers who prefer to enter on breakdowns to enter the markets.
Short-term trend traders on the other side of the fence were just waiting for a test of the 50ma support at 1323.74:
Spx is trying to bounce off the 50ma after penetrating that support early in the day. A rally above 1329.16 will encourage the bulls to buy and for the short-sellers to abandon their positions.
Intraday 60min chart wavecount for the SnP500 still favors the bears but the ES 240min chart is already a potential completed a-b-c pattern. A rally or breakdown will now depend on how the ES will perform over-night:
ES is starting to rally above the critical 1325.25 support/resistance level. An ES rally over-night should result in a gap up above 1329.16 for the SnP500 tomorrow and will encourage the bulls to buy for a short-term trend trade while a gap down below the 50ma could result in a meltdown.
Upside conservative target if a rally follows is the 1378 to 1394 range for the SnP500. There is no high probability targets to the downside at this moment since there is no indication what-so-ever whether an A-B-C or a 1-2-3-4-5 run down will happen or not. Best case for an A-B-C run down will have a target of 1309 while a 1-2-3-4-5 run down will have a target of 1276 to 1268 range on a conservative basis.
Major resistance (just in case the markets stays in a funk for weeks on ends) is the 1344 level while there is no high probability support to the downside except perhaps the weekly 20ma or 20ema supports on the short-term basis now at 1317 and 1307 levels.
Major Resistance on the medium term is the 1385 fibonacci retracement level on the monthly chart and the Major Support 1218 top of April 2010 on the weekly chart - including the weekly 50ma now at 1214 level and rising or the daily 200ma now at 1235 level and rising.
For medium-term swing trading; there are at least 3 high probability scenarios since the rally has started either on July or August lows of 2010 as discussed last May 5, 2011 (and in previous weeks).
Again, this is not the right place to plan for a medium-term swing trade that is expected to be held for several weeks or for a few months. Definitely not suitable for making a new major investment strategy since the downside risks far outweight the upside potentials in the months ahead.
I bought YM and NQ today at 12,361 and 2321.25 as Intrepid Trades. They already have trailing stops since they can be protected during the overnight session.
Also bought some SSO at $53.12 as a potential day-trade with 6 to 9 trading days hold if the trade works. Stop loss at today's LOD.
After-Hours: SnP500 was not able to close above the critical support/resistance level of 1329.16 but was able to form a bullish inverted hammer bar. A positive development for the day but not a high probability rally scenario until the bulls are able to take out 1329.16 with credible force.
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