We figured the market is going to retrace some of its huge oversold rally from Monday sooner or later. Today’s petering out a 3rd time in morning at 1070-1075 made it a high probability in our alert view that sooner than later this failure would cause players to give up for the time being. Simply, the late sell off to SPX 1158, did not catch us off guard. After flirting with SPX 1170-1175 for much of the last few days, market finally gave in as there's really no new buyers ready to take this market any higher. At the end, we are pretty much at where we closed at on Monday.
Here's the thing! We like retracements and market needs to work itself out of last week's technical damage. Wait a minute, but aren't we firmly above last week's unbelievable level and still above SPX 1155-1150? Does it mean all is right and we can resume the uptrend soon? Not really, it’s too close to the trendline March09 at today’s close and it really doesn't work that way psychologically. Basically, because the event took place last week is still recent, people aren't just going to quickly forget about it. People are still pissed and some trapped still will use the rally to sell into. The Euro saga, despite the fact a trillion dollar rescue plan is in place, still raises many questions that will remain unanswered and we'lll continue to be in a wait and see mode.
In addition, we just had CSCO reporting which pretty much signaled the end of this earning season and so market may need a new catalyst. The old saying of "sell in May and go away" is also being heard around the trading community. Something we speculated on April 6th Journal first..."Our speculation..... Possibly a May sizable correction coinciding with the “Sell and go away in May” almanac trading mentality returning as things have gotten back to normal". Well, we definitely got sizable and know the psyche is damaged enough for investors to go stay away is coinciding.
Anyways, for the long run, it's better to retrace back some because there's all kind of pressure out there forcing it to do so. Keep in mind, the ball is still in long's court and ultimately, it's the bulls who will decide which will be the support for this correction. We don't want to ever underestimate the roaring Bulls we’ve witnessed in the past 12 months.
Technically, we are watching SPX ’09 line and really don’t want to be hanging around here with our money, Simply, the trendline plays a big 'psyche' importance….the line was 1147 at plunge time and once broken hell broke loose. Recall, we alerted that day before noon and already thought 1147 was in sight and even 1142-1143.… “SPX 1147 is March '09 trendline, could penetrate and go 1142-1143 as 3rd day with no dip buyers in sight“. Guess what, we have no buyers in sight again. It’s significance is less now as all stops have been blown out, but it’s important to us is it’s the ‘Bull turf’ and we don’t our money toyed/messed with here. SPX1120 is looking like more solid support, but once again, we aren't sure if bulls are willing to let this market slide that far without fighting for their beloved turf sooner than later. As far as plays go, we have a lot of plays that needed some retracement as well. We aren't currently favouring any specific sector over another and we are pretty much just working with the ones with best charts/and or earnings out there.