The Stock Market Should have been Down 5% Today

Today was one of those types of days in the market where you try to match up the ‘news’ with the market result and find yourself scratching your head.  Given the credit rating news today I really would have thought this market to close down 5% on the day on massive massive volume.

What happened instead?  Instead we got a down close, but only about 1% and the volume on the SPY ETF today was dramatically light given the news.  In addition to being dramatically light it was also lighter than the 2/24/2011 price swing which we tested today.  That 2/24 price swing was an important price swing and it seems to me like it was rejected today and at least somewhat affirms my decision to switch to long signal last Thursday, although right now I am on a Neutral signal pending a holding above 1300 on the sp500.

Not only did we reject the 2/24 price swing but we also once again rejected the mini bear channel I have been referring to for a few weeks now.

It appears what is in store for us is a violent trading range type price action in the sp500 between 1300 and 1330 for the next 5 to 10 trading days.

But I do reiterate that as long as the sp500 can hold 1300 I will remain in a neutral to positive stance on the market.

But I really must admit how shocked I am at how light the total volume was today on the SPY.  It could mean this market wants to flip right around to the other side again near 1330 which was my original theory.

This ‘debt situation’ of the USA is really starting to become a constant mainstream headliner and is likely to continue to be a big headliner for several months at least.

The problem is I am not so sure I can conclude that government indebtedness means a total collapse of the stock market.  I keep repeating the point Marty Armstrong made that government indebtedness could be bullish for stocks because you would have capital flight out of government into private assets and sectors.  I think the relationship is elastic and slow changing and I would be careful to make large presumptions about how the stock market will react to X news item about the USA debt situation.

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So it is looking like the next couple of weeks is going to be chop chop chop in the sp500 and plenty of stocks as well.  I do not see any clear up or down trend yet.

Based on the volume and price rejection today I think today could once again be the final low.  Today’s low as also a Fibonacci 50% retracement of the rally from mid March 2011 up to 1350.  Interesting that we bounced right off of this 50%er.

1 thought on “The Stock Market Should have been Down 5% Today”

  1. I have a contrary indicator that would lead me to think tomorrow is going to be a good up day.

    Also see a possible Inverted H&S developing if we can continue to the upside from here

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