Trader's Analysis

Today was a big down day in the market. It has been a while since we have seen some selling of this magnitude. The market gapped lower to break past Friday’s low, and continued lower for the first two hours of the session. Eventually, the market caught itself and chopped around sideways for the rest of the day.

Today’s break of the 1194 level (Friday’s low), confirmed my downside bias of the market. So, what’s next? Right now, I am looking for a market bounce before we move lower. On the hourly charts, we are oversold and have found a level of support. I would not be surprised if we got this bounce over the next day or so. I will be looking for shorts to play as I wait for this bounce.

Today the market started off very well. It gapped higher this morning and was able to make a choppy move higher into the afternoon. Then at about 2:00, market participants decided to sell the market. The market finished the day with a fractional loss of -0.12%.

Is the upside over? I am leaning toward yes. The hourly chart is making lower highs and my daily chart indicators are pointing to a bearish trend. Today the S&P closed at 1197.75; near its major support level of 1194. A break and hold below this major support level will confirm my downside bias.

The S&P ended the day with a 0.44% gain. For the first hour, the market was under the bear’s control. Then the bulls woke up and decided to buy up the market. The market was on a steady up trend for the rest of the day after the bulls stepped in.

I am still bullish on the market. Yesterday’s downside action provided traders, like you and me, an opportunity to buy strong stocks to the upside. Some traders can argue that the market is putting in a top based off the price action over the past few days. As I review my charts, my analysis proves that the market is technically not broken. Also, one thing I have learned while trading these markets is “Don’t short the market on a rally”; and all traders can agree that we are in a rally. Until I see some real selling pressure, I will continue to play the upside.