Technical Bounce At Risk

First Title of the Morning: "Technical Bounce Still Alive."

I chose my words as carefully as possible.....

The speech last night is obviously not having a big positive impact on the market (as I warned yesterday). Pre-market futures are down a little before the open. Under normal conditions (or is that abnormal now?) this would be a wiggle out of the gate and then everyone would pile on and drive the bounce straight up in a hurry. However, in the "new normal" the wiggle could go deep and gyrate around a bit before traders decide if they want to take the market up or not.

I speculate that we get the technical bounce anyway (and not fundamental bounce, and not the news bogey bounce) - if for no other reason than short-covering. Nevertheless, the odds are not extremely high, probably around 60%, and the market just made a lower low, so you don't have to open the barn doors on your portfolio and get loaded up to your eyeballs on this, exercise prudence.

As for a follow-up to those of you who held calls overnight on the "speech", you'll have to pick drop dead points for your stops (on the Q's it won't be easy because the wiggle this morning will be less predictable as per our "new norm." However, if I was in the Q's, I would probably not want it to go much under about 28.40, say about 28.29 and I would have to walk away).

Here is a chart of the SPX:
(click on image to enlarge)

You can see the SPX went right to the resistance line I had drawn out for you yesterday early in the day (and from the past week). I speculate the SPX (and the market) will be able to push up in to the next range, but I'm actually looking for a pause, or even the end of the first swing half-way in to the range at about 790. I think that even if we exceed 790, the Bulls will be leery of the 800 - 805 area and perhaps turn things a little early.

So I'm looking for wiggle out of the gate, a 60% chance of holding and following through to the upside, and a swing that gets its wings clipped a little early after 1-2 days. We shall see.....

7:55 am MT: Intra-day Update: The market has hit its first short term wiggle tipping point. It starts with the Dow this morning. If the Dow can't hold 7,250 in the next little while, then the market is probably headed down for a test of 755 - 757 on the SPX. If the market goes that deep, then the short term bounce gets squishy enough that it becomes even more challenging to cherry pick calls (which I'm not doing yet). We'll see if the Dow 7,250 will hold or not.....

8:02 am MT: Intra-day Update: The Dow didn't hold 7,250. As soon as it broke the market sold it down (as I type). The Dow dropped 30 points in 1-2 minutes after the break, so the 7,250 line was a good tipping point just as I warned. In fact, the SPX is already at 757 in the next minute of me typing this. So now the battle is 755 - 757 on the SPX, flip over to that index now and watch that area for your market checks.

8:09 am MT: Intra-day Update: Based on my analysis of intra-day price action, the SPX is at risk for not holding the 755 area now.

8:11 am MT: Intra-day Update: This is the next critical tipping point. The market has gone deep enough that I'm going to be very, very selective if I decide to play any calls (which I may not). I still like a few individual stocks for calls, but I'm patiently watching this price action. The SPX needs to hold this area, otherwise the market is at risk for another drop down to the 745 area. If the market goes that deep, I will wait for price construction later in the day before deciding on any trades. I'm watching stocks like GS and AMZN for now and hunting around for other stuff. We'll see if anything forms or not.....

3:10 pm MT: Market Wrap: There was a lot of news manipulation of the market today, which was pretty predictable to the those of you paying attention to recent government activities. I was talking with Ben Watson and he called it the "Plunge Protection Program", which I thought described the situation perfectly today.

The net net with the price action is that the Technical Bounce is still alive, but at risk. What was a 60/40 proposition going in to the day is now about a 55/45 at best. There are plenty of Sellers out there and they keep dumping stock on the market every time the SPX climbs another 10 points. I still think the current downswing is crispy, but the bump yesterday gave the downswing some wiggle room to take an intra-day leg down to new lows. In other words, we were very oversold until yesterday. Now the market really needs to build something tomorrow or its at risk for some more Friday selling. It's always a fun ride, we'll see what tomorrow brings.....