More Downside to Come in the sp500

My take as of today’s close in the sp500 is that there is more downside to come in this market.  Today we saw a shooting star doji reversal after yesterday’s high volume downside move.  We also see that the NYSE summation index is now more firmly in the sell zone and appears to be gaining some downside momentum.  Percent of stocks above the 50 day moving average is also in major sell mode at this time.  And the 10 day moving average of put/call ratio hit a double bottom at a major extreme.

The decline may be worth shorting and I may switch to a BOT short signal next week on Monday morning in the AM.  The Russell 2000 has been notably weaker than the rest of the indices and looks like it could continue to move down next week.

This appears to be the long overdue correction that everyone was talking about.  I prefer to think of it as the ‘operation bottoming tail’ correction.  The Russell 2000 has already started to create it’s yearly and monthly candlestick bottoming tail and I expect the other indices to start doing the same next week.

1260 is still the key level for the sp500 that I would look towards as either a supporting point or an accelerating point for more downside.

I did a previous post on an important Marty Armstrong 8.6 year cycle turning point due on June 14, 2011.   It will be interesting to see whether or not the market can get a decline going into this date.  June 14 is quite a long way ahead of us on the calendar.  Over 4 months.  So for now this date remains a bigger picture possible pivot point.

In the meantime there appears to be more downside on deck for next week.  I am seeing key complex breakdowns in key bellwether stocks this week which would seem to support the case of an extended correction.

I don’t know if the sp500 will be able to correct all the way down to 1220, but I do view 1220 as the longer term MUST HOLD support level to keep this bull trend intact. 

Anything under 1220 would begin to change the tone of this market markedly in my opinion.

But if 1220 can hold ground over the next few months then there may be an ideal buying opportunity setting up later this year.

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5 comments on “More Downside to Come in the sp500
  1. JR says:

    I concur, I went all in today!
    I guess and fear!(Bobby Burns)

  2. Geoff says:

    interesting, . . . . your posting carries many of the absolutely identical points made by commentator Adam Hamilton piece “SPX Correction Looms” posted today on Kitco website at 3:09pm today. also “pugs” public posting today at around 5pm predicts SP of around 1220. earlier this week, the WSJ ran an article about some analytical shop that apparently has an incredible track record and they are adamant that a minimum 11% correction is due within the next 1 to 2 wks from around the 19th/ 20th Jan. their thesis, i believe, is that sentiment is just way too bullish, i.e. market too complaisant.

    certainly the sell off in such shares as Apple and Google, despite the spectacular earnings, might be hint that something is not right. also, the Russel 2000 has not been acting well. however, i am short (via puts) Oracle and that keeps barreling ahead / up (unfortunately).

  3. Tom says:

    Puts on individual stocks can be tricky. I have run into similar problems in the past thinking that most stocks would get hit.

    Calls on TZA or EDZ may be better way to go. But I must admit KO looks quite weak and ready to break down again.

  4. shrihas says:

    I am not sure whether markets will hold till GDP date which is 28th Jan. I shorted S&P on Last Tuesday but covered on Wednesday which was too early.

    I will see on Monday, if S&P goes up by 10 points then will short else will wait till Friday.

  5. Tom says:

    Sounds like a good plan shrihas, good luck and good trading to you…

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