Quick Update

The market seems to actually be behaving differently on this pullback than in prior ones the last few months, unable to muster strength where it has immediately in recent months. So, I would say the odds are good for a continued pullback. Also, from a candlestick perspective, bears have been able to dominate the close in recent sessions showing no sign of a reversal yet.

The 50 day MA is about 1.4% below current prices and may be an area of support. Also an unfilled gap up is still present about 2% below current levels. For those that are short/inverse, you may want to consider setting some limit orders to sell part of the position at a price corresponding to the 50 day MA on the S&P 500. For the open blog trades, I am not going to do that just yet, because of my goal the last few months of eventually getting in a large degree market turn with limited risk. I want to see how today closes and if the market will end up retracing the Oct rally in less time than it took to form over the next few days. So barring a classic reversal candlestick, I will be holding the trade.

On a purely indicator outlook the market is basically short-term oversold, and we should expect a bounce today or tomorrow if the market continues its trend. Inability to do so, particularly if there is acceleration to the downside (i.e. the market makes a larger 1 day decline than any since Oct 1st) would be another sign of changing tides. Since today is set for a decent gap down as I type, today should be telling at modest to large gaps at oversold levels in an uptrend (especially this one) tend to be bought almost immediately from the open.

My own perspective is that this is a very dangerous time to be long for anything but buy and hold (forever) investors.

While I don't have time for more detail right now, I believe the current situation is that the higher the market goes the more the bulls think they are correct, and oddly it may seem, the bears firmly believe they are correct as well despite higher prices and such a big rally. So both sides are confident. When confidence is high, pain tolerance and allowance for slippage against positions is high because of belief that the position is solid but needs some room to work. I think this likely means that the odds of increasing volatility are good.