Crunch Time

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The chart above is SPY again as of today's close. The notes on the chart above are what I believe is the best way to view the market right now. If the markets move above last week's high, that would be abnormal from a price pattern standpoint if the market is going to go much lower. If the lows around 80.00 on SPY (800 S&P 500) are broken, then it would almost certainly lead to a large decline over the next couple months.

We are in the dead center of the two important points marked, so the next fews days should be defining. Unless and until the 88.00 level on SPY is surpassed, I would not even consider exiting the current BGZ trade (cost basis a little above 62.00). If it is surpassed I would consider exiting if things do not reverse below that level within a period of a couple days.

One basic concept that I always apply when analyzing a chart is looking at the market in terms of strong, fast price moves and weaker, slooooower price moves. Almost without exception, when a market makes a major turn, it occurs with a stronger, faster move in the opposite direction than the recent price behavior. The strongest, fastest moves since late October have all been down. Also, on a shorter term time frame, the large decline from last Thursday through Monday morning took just a hair over 2 days. It has taken almost 4 days already for just over half of that decline to be retraced. That is a strong argument for the prevailing trend remaining down at this point.

The shorter term models I use for most trades on the blog are basically in neutral territory right now. The next overbought or oversold signal will likely be telling as well.