Thursday, December 8, 2011

Market at Channel Resistance - Possible Sell Tomorrow

Click on Chart to Enlarge

A lower low in the S&P 500 tomorrow will trigger a trailing 1 bar low sell signal in the 14,3,3 stochastics. Previous signals are shown at the red vertical lines. Recent sell signals have been good times to get out of longs on a trading basis.

The blue lines denote the channel lines of the "flat" pattern that formed from April to July. The market has repeatedly used those channel lines as support and resistance thus. The market has again begun to reverse off the upper channel line. Also the last few days the S&P has been up against the 200 day SMA and has reversed down off it again today.

I view 1295 as the major horizontal resistance, so if the blue channel line is broken, that 1295 will be the next resistance.

It is not surprising to see stocks sell off a bit heading into the weekend. If the market truly is hinging upon anything that happens out of this ECB conference this weekend, then it may be expected to see some selling prior to "the news." Then it would not be uncommon for seemingly "good" news to come out from the meeting with a "Yea! We fixed it!" kind of headline, but the markets sell off on the "good" news.

If a lower low is made tomorrow in the S&P 500, which I think is quite likely, then I will post an inverse ETF trade on one of the indexes with a stop above the October highs. Time is running thin on all bearish scenario projections from my perspective. So it makes sense to take any sell signal here, and be willing to do it again over the next few weeks if the market does rise modestly further and stops the trade out.

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