Tuesday, December 9, 2008

Buy The Dip?

SPX tried to retake the highs from Monday early on but got stopped in the mid 910s and pulled back to the 890s quickly. Closing at 888 or so this market is setting up for an interesting move midweek. The SPX actually closed today with an inside day formation. This usually sets us up for a big move in either direction. There are lots of reasons why we could come down and sell off further but the market seems to just be discounting these reasons and rallying in the face of it. I am of the opinion that we rally into year end and squeeze the shorts to up near the 1000 SPX mark.

However, there is an important daily pivot to keep an eye on this week. That 850 level has marked support and resistance since early October and is what I will be looking to act as support once again IF the market comes down that far. I believe we could see a bounce off current levels midweek to rally up thru 915 but there is also a real possibility we come down to test the 850s beforehand. Either way be ready for both scenarios to unfold by Friday. But be ready to buy the dip in the 850s if it comes and don't let CNBC talk you out of it.

Oh and contrary to ppopular belief todays selloff was not a scary event as you may have heard in tv land. Since Friday morning we are up from 820 SPX. We hit 920 Monday...we came back to 888 today. That, my friends, is called profit taking and until a retracement proves to be more than a retracement of the prior move then you should not view it as worrisome.

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