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S & P - Confirmation Of Lower Prices. Testing A Half-Way Retracement.

Thursday Evening  19 August 2010

 One of the biggest surprises was the complete breakdown in price,
last week.  We circled the activity on the daily chart.  From all of the
evidence of developing market activity, it almost looked like a certainty
that price would at the least make a probe higher.  It was not an easy
trading area, for we got clipped twice getting short and then stopped
out.  We have since made it back, after last Wednesday's break, and
it is that same break that confirms price is headed lower in the weeks/
months to come.

 After being short from last week and taking profits on the position,
we were on the sidelines, waiting for a sign of weakness to reestablish
another short position.  That opportunity came on Wednesday, when
price failed at a "double top," of sorts, making a key reversal.  That
was described in an article from this morning, [See S & P - Working
The Market
, click on http://bit.ly/cbfT9W] where there was an
indication of weakness and a reason to sell, immediately.

 Because of the existing trading range, half the short position was
covered near the bottom of the range, for money management
purposes.  While it is apparent that the larger range bars,
accompanied by volume, are to the downside, each sell-off has been
followed by a "come-back" rally.  That prompts a cautious respect for
what may happen at any given time.

 The small horizontal line, just under last week's low, indicates support
at that low, 1066.25, and it is also the area of 50% of the range from
the 1002 low and 1128 high, around 1063.  We often say, "Anything
can happen," and surprises often happen, so if there is a break of the
1066 area, with a wide range down and on increased volume, expect
more ease of movement downside.

 On the other hand, given the odd character of the market's ability to
make surprise rallies, from the mat, so to speak, lately, an unchanged
to lower opening, followed by a rally instead of continuation down,
would not be unexpected.  After all, there are two potential reasons
for support down here, the previous 1066 mentioned and the 50% level.

 Tomorrow is the end of the week, and it will be interesting to see
where the weekly close is painted on the chart.  The direction is
clearer, but the journey down is not...at least not for now.

 Committed to the short side.

 

S&P D 19 Aug 10