..respect SPX/200ma & equities/9ema

When the market slides about ~2% in the opening leg of a trading day and never recovers,  you’d think there was one piece of negative news flow catalyst to account for such a broad based drop.  Unfortunately, today you cannot find a single concrete catalyst to cite (only mixed lot of small ones) and you need to look for the real underlying reason for such a negative tone.   In trading,  you only have to go technical analysis/ charts and figure out the culprit.   Yesterday,  we said last weeks range trade off was a caution that we’ve lost momentum.   It is clear today,  Thursday’s failed attempt over 950SPX has slowly installed a negative tone (see alert-comment intraday post) leading to a bigger broad sell off a few days later.   You could clearly see this pattern prevailing in tech land.  SOX  , predominately, as the index has declined on average of 1.5% a day for 3 days.   The question now,  is the last 3 days the beginning of..???...“We need to respect the probability of a profit taking correction finally from those participating since March to allow latecomers a chance now to get in“.   Well, we need to break 200ma for this to become a ‘real’ possibility!!  Simply, we see 200ma as the critical level as after 10++ days over the mark, it will be a huge disappointment to close below and will surely lead to more selling and shorts pressing fresh positions.  Back to today's action,  part of our reasoning today that 920-923 gap is vulnerable is any single negative catalyst will trip this level and eventually test ~200MA(now 910) for an underlying bid,  today was not a day to look for a reversal based on Euro stocks close.  Thus,  no reason to buy as ~950R looks like a stretch now (possibly summer high hit at 956) after losing 929S today.   As we said before,  it will be selective stock/group picking this summer (even if this was the summer high).   Meaning, there will still be very good opp's to make $$.     As far as individual stocks, simultaneously most we shadow have slipped below 9ema in the past few sessions and if you've been with us since day 1,  you know we view this as a negative until the level is recaptured.  This is a possible show leading the market to 200ma.

Instead of guessing and/or assuming we will continue the 10 day holding pattern, trading the range by buying 920~, selling 950~,  we rather wait and see what a few earning reports say this week.    We have BBY  tomorrow for the consumer , we also have ADBE  Tuesday/ RIMM  Thursday for tech.  In other words,  we rather be buying a ‘positive’ catalyst for a trade,  albeit in earnings or some other news flow.    Still, we now fear we might be running into a ’cooked in’ Q,  especially in tech’s.   The reaction to reports will be crucial.   If we get an excellent report and the reaction is eventually a sell on the news soon after,  it will be a sign of a profit taking correction in full swing.  If the reports just plainly 'suck', it will paint a broader economic picture and the rally will not be renewed soon.

Until the reports, keep in mind,  we know any good news flow can really bounce this market as the volumes were relatively light, (todays sell off didn’t come with a volume spike), therefore we can easily melt back up over 929+ and sneak in some intraday trades.