852

I think the guys who need to sell see the Fed propping up the market each time the S&P 500 (SPX) gets down to 852 and, in anticipation of prices popping up quickly on futures-induced rallies, they stop selling. Why sell at 852, when you can wait an hour and sell at 900? We have already seen it happen today, as SPX touched 848 and then rallied 30 points (3.5%) in 90 minutes.

It seems like the market moves like this –
1. A leg down on heavy selling
2. A bounces on futures-driven trading, where there just aren’t any sellers
3. A hard selloff, as sellers come back again to unload more shares.

I expect this to continue until either the sellers are exhausted or support at the 852 area is broken. I think this week we either take out the 852 range or 852 finally proves itself to be a tradable bottom. I think a tradeable low will be in if SPX can fall to the 850 range and just sit around at that price for a few hours or a few days, without the need for the Fed to support the price. That would prove to me that sellers are exhausted for the time being and would give me confidence to look for a few trading positions.

The bottom line is that the trend is still down, but I have to see what the institutions do and make sure that I am not on the wrong side of how they are deploying their money.

More late nights of homework this week…