Red Friday

As you know I have a variety of charts I consult – some prove to be valuable in short term market conditions, others on a more medium/long term basis. Although I am not a huge fan of moving averages I do use a set of Bollinger bands for my daily charts and they have treated me pretty well in the past few years.

If you look at candles or momentum indicators today you will see very little to justify the current drop as well as the fact that we seem to be in the process of painting a low at around 1276. Of course it’s quite possible that we drop further from here and if we do so it would mean pretty bad medicine for the bears. Let me show you why:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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Here’s what I’m looking at. The 25/2.0 BB is what concerns us the most right now and as you can see we stopped right at the center line, which I concede is the moving average. Now if we drop through that line odds are we drop to 1250. And of course a breach of the 1250 cluster would most likely get us to 1210 or even 1100 – the latter may be a possibility if things start accelerating, which they often do when over leveraged longs are starting to feel the squeeze.

Right now the tape looks pretty much done for today, meaning I am looking for signs allowing me to get positioned to the long side. But if we snap back higher I will keep an eye on velocity and momentum in order to determine if this is just a shake out or if more downside is in the works. For now I recommend to refrain from top calling and to let the tape tell us what’s really going on.

BTW, if you’re a zero sub: Very strange readings today – it almost feels as if the buy programs suddenly switched into reverse. The dynamics seem to have changed today – but one day does not represent a new trend. Let’s give it time.

Cheers,

Mole