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S & P - Still A Two-Step? Two Step Rally, Two Step Decline.

Tuesday Evening  8 December 2009

In the Article, S & P - Ayn Rand Nailed This Over A Half Century Ago!, we
were corrected in the reference to "Who's On First" NOT from the Three
Stooges, rather credit goes to Abbott and Costello.  It turned out to be our
most popular article, to date, and we thank our readers.  Feedback is
always appreciated.

 The quirky S & P market has been showing more signs of weakness than
of strength, but that has not deterred the market from keeping rallies going. 
The failed high from Thursday, followed by the new failed high on Friday, which then drove price lower than Thursday's low, shows the battle between
buyers and sellers, or maybe the balance between the two.  It continues to
this day, even after three weeks of rally for a day or two, and decline for a
day or two.  One thing is certain: it will not go on, let's say for forever, in
case it does go on for another three weeks.  Ho! Ho! Ho!

The inability to hold new highs tells us that the demand buying has
weakened.  Monday was an inside day, a small range with little volume
and not a lot of conviction from buyers or sellers.  Tuesday saw downside
continuation, confirming the weakness from the highs.  The question of the
day is, will there be more follow-through from sellers that can break 1085
support?  That is what is needed; a statement from sellers who have yet to
take advantage of a vulnerable market condition, such as this one.

 We have already addressed the shortening of upward progress as a
measure of a tired bull market,S & P - A Picture Worth A Thousand Words
where we described the lack of upward progress and the declines getting
deeper.  Still, the missing link is supply selling in sufficient volume to break
the upside momentum.  We come to such another area tomorrow, if price
can get there.

You can see the trendline up from the lows, indicating the trend remains
up overall, but neutral for the past month.  The indications from market
activity argue for lower prices, but that line has been used in the recent
past, and it did not work.  It may well be that everyone is taking the rest of
the month off to let the market flounder around the highs.  Sellers need to
break through the 1085 level, or reach 1085 and then stage a weak rally
as a prelude to another thrust through that support.  If not, buyers will
simply rally the market, although on what grounds is uncertain with no jobs
report to bolster prices, at least for an hour, like Friday.

Based on what the market is showing us in the present tense, we have to
go with the direction indicated, and that is down.  New information may come
in tomorrow, at some point, to rally the market back to the upper end of the
trading range, but that is less of a probability.  Then again, if sellers do not
show, throw probability out the window.

We recommended shorts on the weak rally after the gap lower price decline
that continued Monday's lackluster effort.  The inability to mount a rally all
day suggests that price was accepting the lower level near 1092, but price
has been full of surprises in both directions, these days.  Early evening
trade puts the market 150 tics higher from the close, so things can still go
either way.

S&P D 8 Dec 09