SPX Downside Odds

Well, we got that bounce I suggested the other day, and then some. What I didn’t see coming was how fast this thing would turn – but that in itself leads into my medium to long term assessment of where we’re heading. Recall that the velocity and inherent pattern of the retracement would provide us with important clues for the future. We now have additional evidence and I will address this in more detail in the near future.

For now however I am sure all you guys want to know is how far this thing is going to drop. Frankly, I really don’t know for sure, but have a few charts that suggest chasing this thing is not a good idea:
[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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The problem with picking a bottom on those fast drops is that it’s easy to wind up catching a falling sword. Yes, we could turn at 1255 but it’s entirely possible that we run toward 1235. Now what I would want to see here is a push outside the 25-d BB which in itself is already pushing outside the 100-d BB. Those moves are usually where I want to take a contrarian trade.

If you’re still holding short (or reloaded on the rip) let me however warn you that Mr. Vix is pushing far outside its 2.0 BB right now. I’m pretty certain that barring any miracles in the next 30 minutes we’ll finish outside the upper boundary and that sets the stage for a possible VIX buy signal in two or three days.

That’s the weekly SPY chart (sorry, I had an issue with pulling up the SPX on NT) and it’s telling a similar story. Seems that we ought to bounce here pretty soon, so again, if you’re holding short be nimble and keep a tight stop.

That’s it for now – I have various other charts I could show you but want to make sure everyone sees this post before the bell in what is 28 minutes from now.

UPDATE 3:42pm EDT: I just looked at copper and it’s a very crucial chart today:

Copper actually reversed right at yesterday’s NLBL (not no the chart anymore) and it now dropped through today’s. The new NLSL is at 4.0125 – forgot to paint that one, but it’s simply Monday’s low. In the interim it seems we are failing the buy signal here and that may have medium term (bearish) implications for equities.

Of course if we snap higher here in a day or two and push above the new NLBL it could also be a bullish signal. So let’s keep a close eye on this thing.

Cheers,

Mole
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