Thinking of Wading Back In

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Some notes are on the chart above. Basically price has retraced this move down to a point where I would expect the advance to stall if new lows are in store below the last week's. Now it would not be surprising at all to see price move back toward the recent lows only to rebound and move back up into this area or a little higher again to form an ABC type move. Anyone who has followed the blog for quite a while may remember some posts regarding the general expectation after an important high....

1) an initial move down to undercut the first support level (from the prior rally)
2) a rebound back to the middle of the the initial move down, often 50% retracement or so
3) often the rebound takes an ABC (up down up) type form

On the chart above the first support (on the S&P) was never undercut. However, several indexes did: Russell, Nasdaq, Dow Transports. So, as long as price doesn't move up much at all from here, the general fit is still good.

The technical indicator set-up for a bearish trade is improving but not glaringly obvious to take the trade yet. One thing of note is that volume has basically fallen every day for the last 5 days on the NYSE as during this advance. I am not a volume guru on these types of things, but I can't see this as supporting the case that there will not be further lows below last week's. Now a major advance type of day early next week could change that in my mind, but right now, I view it as a suspect bounce, and see no reason not to sell into it soon.

I plan on posting some charts of some good longer term short sale candidates, but for now any avid chartists may want to check out GMCR, CTB, FMC, SHLD, VTR for starts.