A Classic Retest or Something Else

Today the Sp500 (so far at least) is rallying strong right back to the underside of the very steep up trend line that it broke down through yesterday.  This is pretty typical classic type upside reactionary action in this index.

Yesterday on the SPY we saw a downward break through of the up trendline on 280 million shares.  It will be important to see what the total volume is on the SPY by end of day today and mid day as it should help confirm or deny that this rally today is a ‘bear kiss’ of the underside of the broken up trendline.

If the total volume in SPY by end of day comes in at 200 million or less then I a going to have to view this as a confirmed ‘bear kiss’ reactionary rally back up to underside of the up trendline.

I think it actually better (for the bear case) that we rallied straight from the get go today (and hopefully on lighter volume) instead of having an early morning swoon down that went through yesterday’s low.  Why?  Because typically one can see exhaustion moves to the downside when that happens and the development then of a reversal and longer upside reactionary phase.sp50020101020

The fact that we rallied straight from the get go today tells me that the initial swoon down yesterday is not complete and could continue its path down rest of this week.

There is zero doubt that there exists at the present time plenty of traders who like to get the ‘early short’.  The problem with this is that it can cause plenty of nervous short covering creating the type of rally we see today.

In my view the market is currently struggling to ‘stay alive’.  Keep in mind that the closing price today is really the most important.  At the time of this writing the sp500 slightly busted above the up trend line. 

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5 comments on “A Classic Retest or Something Else
  1. Nick says:

    I don’t remember how I got to your site but I really appreciate your market analysis. Thanks for taking the time to lay out your views.

  2. JR says:

    Again top picking is very dangerous. I would think a close above 1180 is very ominous for bears.
    Problem there are so many strong forces pulling for the upside and so few with an economic interest in the down side.
    For example fund managers don’t look good when the market goes down! But they have every motivation to help push the market up.
    The algorithm boys are playing with pennies albeit a trillion of them. Still they really don’t care about the direction. Up or down they still make money.
    The downside is without a constituency.
    But the upside is welling over with guys who have a dog in the fight!.

  3. Tom says:

    Yes well a close above 1185 would be quite bad for the bear case. Personally I think we roll over hard down into the end of this week or at least go sideways.

    I suppose there is an outside chance we may get one more close above 1185 but then I would expect it to be a one day event.

  4. cliff says:

    remember what happen back 1930 before collapse

  5. ed says:

    Well I can see we definitely had a kiss of death of the trend line today. The volume has been higher which may make it more difficult to manipulate the market. A lot depends on the dollar tomorrow

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