Market Meltdown

SPX 10.28.09We now have three of the four major indexes trading below trendline support which began with the inception of the rally in March.  Implication is simple.  We are in for a larger correction than we had previously.  In a nutshell, “buy the dip” is off the table for the near term. 

Fibonacci retracement levels now clearly come into play.  This does not imply that we’ll reach 23.6% tomorrow  [as some impatient traders wish] but now we know what our overhead resistance levels are and should trade accordingly.   News or currency fluctuations could cause short pops in the market; up days, if you will.  Short at those higher levels with the overall mental stop in SPX above $1101.36.  We will drift up, down and chop around.  Expect a bounce off the 23.6% level near $999 as you, me and every trader out there will cover a portion of our short positions.

Indexes broke 10.28.09RUT broke 1st, followed by SPX then finally Nasdaq.  The Dow has yet to confirm but it’s a foregone conclusion with the others comfirming.    The Nasdaq probably has the most $$ to give since it gained the most but bounces may inhibit a large fall.  Uncertain at this point in time.  [to be continued]

SPX short spots

So here’s my plan in terms of *where* I’ll add to shorts or expect solid bounces.  News could certainly alter the picture but barring any major event, this is my game plan.  Again, overall stop out point well above the high of the rally; maybe $1125-30

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