Reversal Brewing…

Can you say reversal?  Things had been rolling pretty nicely to the downside for about seven days now.  This is the first bounce that has had any juice, and I think we will get a couple of days worth of followthrough.  Most of the indexes and choice stocks put in some gorgeous reversal candles.  Check out this doji in the $SPX.

You should all have noticed that we have been here a few times before.  Check out the massive reversals that have accompanied this level for the past few months.

I think we should be looking towards at least 875 in $SPX, with the 900 range being a more likely target.  1225 looks nice for the $NDX, while an open gap remains up to 1275, but that seems pretty optimistic.

For those of you who have gotten into the ICE trade I recommended a few days back, now would be a good time to take profits, or close out partial positions.  We have gotten close to prior resistance, MACD has flattened out on the histogram, and we have increasing volume on large-wicked candles.  All of these  things paint a very nice picture of a reversal if you consider we have fallen (as of today’s close) 20% from the reco price.

Keep eye on this rally as we head back towards the above-mentioned levels, as our puts should be cheaper there, moreso should the $VIX stop its march higher.

Finally, I had mentioned to keep an eye on the XLF, or your financial sector tracking ETF of choice.  The XLF today was within one and a half ATRs of being at new lows.  Yes, we got some reversal here too today, but we still closed down nearly 5%.  Keep an eye on the puppy as the financials typically lead the market.  New lows in the XLF should be important to the markets too.

Skål!