The Monkey Rang the Bell

Pre-market futures are down sharply on no news. The monkey simply rang the bell and everybody is grabbing their cheese and going home. I came in to the day speculating that profit-taking on the sharp upswing/trend would hit by the afternoon. Well, it looks like the savvy mutual fund managers figured the same thing and decided to get a jump on things. That's what smart money does, speculate, which means getting a jump on things.

The bullish tone change the past several weeks won't go away without a fight. Expect some buying and thrusting from all the late comers to the party who have buyers remorse because they've been standing like a deer in the headlights and staring at the big run-up for the past 2 1/2 weeks.

7:32 am MT: The SPX (gapped) down to 820. The Broadening Pattern on the 30m charts held. The SPX poked through the 820 area (remember that number from late yesterday) and down to 819. This area is not likely to hold. The next target down is 803 - 806 area, so about 805.

Here is a current 30m chart of the SPX showing the rollover:
(click on image to enlarge)

You can see the Broadening Pattern I warned of yesterday has been significant several times both yesterday and today. It won't be much longer and the pattern won't be important anymore, and then it's on to the next thing. But for now, it will act as a guide, probably at least towards the 803 - 806 area, and perhaps down to the 780 - 785 area in the next couple of trading days.

7:43 am MT: Here is the first potential wiggle point. I sense that this wiggle might not carry much push behind it. If it has a small push then it will probably tap out around 821 - 823. A medium push would probably tap out around 825, and a strong push would reach for 828 - 829. Despite the late-comer's phenomenon, I think there is enough savvy money out there today that simply wants to lock profits on the freneticism and go home. That means that the selling will probably be stronger in the morning (the fund managers that want to sell and start their weekend right away), and then later in the afternoon (the fund managers that felt guilty about not at least trying to put in a full day, but not so guilty that they didn't want to beat the afternoon rush hour going into the weend).

So I speculate, in a broader view, that the day will probably be: sell the morning, deer in the headlight gang buy the mid day, and sell the afternoon.

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

On the daily charts, the low of yesterday is important around 814, then the 803 - 806 area that I mentioned earlier, then the 790 - 791 low from three days ago, and then the 780 - 785 area that I mentioned earlier. A big consolidation could go as far as the 770 area. That's a lot of areas. I think the more important areas to watch will be the 805 area, which the market could drop to later today, and then the 790 area, which could be a target on Monday.

8:02 am MT: The first wiggle was a weak push just as I speculated. It tagged 822, which was right in the middle of my 821 - 823 shorter target. It was a nice Bear Flag and now the market is taking another leg down on the 5m charts.

Here is a current 5m chart of the SPX showing the first Bear Flag:
(click on image to enlarge)

Remember to keep a perspective on things. There are enough traders with buyers remorse (deer in the headlight gang) and 2006 envy (I lost my Ferrari and I want it back gang) that the market won't roll over without some thrusting, jousting, and fighting. However, there appear to be enough mutual fund managers wanting to take a profit today that the market (SPX) is most likely headed for a consolidation day, and probably won't get back to yesterday's highs, but rather consolidate down in to the lower 800's. We shall see.....

8:19 am MT: The SPX hit the next wiggle point (I targeted 814, it hit 815.59). The sellers continue to outweigh the buyers. It looks like the sell/buy pattern for the day is playing out so far. Some time in the next couple of minutes we may get the first of the deer in the headlights gang buying. Then a bit of a tug of war back and forth.

8:23 am MT: The gyrating has begun, so once again, stand back a bit on your view, go out a time frame or two and get a bigger picture of the price action. In general, I still expect price to continue to play out with the sell/buy/sell pattern of behavior I detailed earlier.

12:20 pm MT: The market continues to play out the way I speculated. We got the early selling, and then some mid-morning to mid-day gyrating by some buyers. After all that, the market is sitting just about where it was 4 hours ago, which is down about 2%.

Here is a 30m chart of the SPX:
(click on image to enlarge)

There are still enough buyers out there hoping to ride the wave they missed all the way through the swing, or hoping the swing will run to the top of the world so they can get their groove back on. So the market might not be quite ready for any late-day/end-of-week/end-of-swing profit-taking. But I speculate the thought of taking profits again before the weekend is hovering around the frontal cortex of a lot of traders minds right now.

The 30m charts are showing the possibility of a bounce right now, but I'm not buying it, I think the market may wiggle some more in the next little while, but the risks of late day profit-taking are increasing. I don't think we will see a big sell-off, there's way to much bullishness for that, but I think the market will soften up and sell a bit into the close.

12:59 pm MT: There's another spurt to the upside. It's pretty apparent to me that there is a segment of fund managers that are still transfixed by all the "good news" the past several weeks and are buying every little dip. If we get the profit-taking I am looking for, it won't happen until the last 30 minutes.

1:07 pm MT: I have been pondering this question in my mind for the past week or so: Is there so much focus on the perceived "good news" recently that the upswing/uptrend has very little in the way of pullbacks?

Normal price action would see some pullback consolidations by now, but there may be enough googly-eyed traders out there that the uptrend just kind of flattens out and rounds a bit. It's like someone running up a hill. Normally a person runs up a hill, then walks a little, then stops and takes a breather, which consolidates their energy for the next move up. The current price action may be like someone who is fantastically desperate to get to the top of the hill, as if their very life depended on it. That type of person starts running, then walking, then crawling on their hands and knees, then dragging themselves on their belly with their elbows when their hands wear out, and then finally just wriggling and pushing themselves with their toes as they slide prostrate across the dirt and rocks. The first person usually gets to the top, or at least has a good run. The second person exhausts themselves, and does some damage to their body along the way. The second person also takes an even greater risk. They can get so worn out, and their body becomes damaged enough, that they lose their direction, turn sideways, and then roll back down the hill completely out of control.

This market may have too many traders desperate to get to the top of the hill. A consolidation would actually be healthy, and create some sustainability for another push back up into Earning Season. I would rather see the market catch its breath right here, it's been a long run.....but of course I'm not in control of the market, so as always, we shall see.....

1:28 pm MT: Well, I thought it would be the last 30 minutes, I was off by two minutes. We'll see if this is the end-of-day profit-taking I was speculating about. It still may not be enough to stop the desperate hill-climbers. That's why I said earlier, don't look for big selling, just a bit of selling into the close.

1:36 pm MT: And the answer is.....profit-taking. It looks like a bit of net selling into the end of the week, as was speculated. We'll see how this finishes.

1:50 pm MT: And the googly-eyes come right back. Such is our market. I don't really like watching days like this for too long, but I wanted to hang around and get a feel for the mood of the various types of traders out there right now. It wasn't much to trade, but some days are like that, more information gathering then trading. This market continues to fight every little pullback. Which means that Earning Season is still the only likely candidate in the next three weeks that could possibly change the trend. Other than that, I'm not looking for pullbacks to go very far. We'll see what next week brings.

2:00 pm MT: Market Wrap: The market did see the Friday profit-taking I speculated. However, there were plenty of buyers fighting it all the way. Every dip got a buy, which created quite a bit of chop intra-day. The net selling closed the market down 2%, but the upswing/uptrend is not pulling back much, but rather just oozing its way into more of a flattening, rounding consolidation because of the frenetic hill climbers. I have been speculating for more than a week that the upswing/uptrend (by the way I call these "chuggers") would not go away without a fight. Well, the fight continues, but the fight is also starting to get unhealthy and carry some risks, especially in our economic environment. We'll see if the market will have a healthy consolidation early next week or not. I'm still targeting Earning Season as the next major potential seed change, so until then, it's probably bullish.