I know I am stating the obvious here, but the market is looking extremely weak. It is starting to look like it will not even be able to manage a bounce to the 1120 to 1130 range this week.
Today was a great opportunity for the market to get a decent decline going and then an end of day reversal and positive or only slightly negative close. In fact this is what I was expecting to happen and it would have set up a nice catapult for a move higher to complete this bounce that began on 5/25/2010. Instead we end up closing near the lows of the day again.
The pattern of the sp500 has a strong similarity to a waterfall type decline. That basically means that the market is in a mode of taking only 1 step up for every 3 steps down.
A big enough bounce would have been perfect for a new catapult to the downside. It appears now though that the market will sell off from already oversold levels. So it is likely to be a chop chop chop down type move instead of a very fast crash. That is not to say a one day 10% decline is not possible, it certainly is and I would not be too surprised if it did occur. The argument is often made that crashes occur from already oversold levels and I agree with that point. In a previous post I pointed out that the worst part of the 87 crash started from an RSI level of 30.
So it appears that the 1065.59 level is the line in the sand that must hold. If we break under there tomorrow and close badly under it then I can only assume that a total collapse is underway.
On the other hand if we somehow miraculously get a strong rally going tomorrow or Thursday, then we really need to bust through 1103 with conviction to say that a move substantial bounce is on tap.
There are a bunch of very negative astro aspects (according to Larry Pesavento) that start to kick in on 6/2/2010 and intensify 6/6/2010 and 6/8/2010 and go into 6/23/2010.
I would not be at all surprised to see this market continue to drip down lower right into 6/23/2010 before any real bounce can get going. Weakness has the upper hand right now and it is the least path of resistance.
It would be absolutely amazing to see the market decline right into 6/23/2010 because it would match with almost near perfection the decline that started in April 1930 after that 5 month automatic rally ended during the 1929 1930 period.
If we do break 1065.59 tomorrow and stay under then I think a target of 920 to 950 is a suitable target.