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Tuesday, December 4, 2012

Daily update 12/4

We got slight follow through on the reversal day.   Here is the daily SPX chart.

SPX closed slightly below yesterday's reversal bar low and slightly below the up trend line.  In theory this should confirm the reversal.  I find it interesting that I have not read or heard anything in the media about the reversal day at all.  This is an obvious and in your face reversal pattern that nobody is noticing or believing in.  I showed the Bespoke poll in a post a while back.  It has now had the most bulls all year for 3 weeks in a row.  This seems like a very bearish combination to me.  I don't think this is just my current bearish bias talking.  The market tried to rally a bunch of times intraday and each pop was sold into.  Lets take a look at the 195 minute SPY chart.

We ended the day below my green support line and with red price bars.  This is the area of the 18 SMA which is possible support.  Lets zoom in to the 60 minute chart.

SPY ended the day below the 50 SMA.  Volume was light in SPY today.  I am sure that will make a lot of people suspicious of a down move.  The most bearish thing a market can do is go down on light volume.  That indicates a lack of buyers.  You may have heard the expression that markets can fall from their own weight.  That is a symptom of a bear market.  So is very bullish sentiment every time the market pops.   We definitely have that last one, LOL.  I must have heard 50 times how Dec. is always a bullish month.  Well guess what.  It was not bullish in 2007 when we were starting the last bear market.  It remains to be seen how this one turns out.

We have a confirmed reversal pattern, red bars on the 195 minute chart, and SPY is below the hourly 50 SMA so I am short overnight.  I don't really know how this will play out.  We could have a quick pullback and rally again or we could head on down to test the Nov. low.  I am suspicious because of the sentiment that we may end up testing the Nov. low.  I will be using a break above the hourly 18 SMA as my exit on shorts.


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