We got our better than expected employment report today and the sell-off intensified as anticipated. OK then, what's next? If you were a bear you would have closed your shorts today because the selling sentiment peaked. You could almost feel the reversal by the end of day, especially after it bounced off from 695ish 3 times in the last 10 days. But, do not be fooled. It was mainly short coverings and it may even continue to a small bounce come Monday morning. Yes it is in oversold zone, but the selling is not over yet. Looking at the economic calendar there is really nothing major to push the market one way or the other in the next few days. The PPI report will not be out until the 14th. Watch 708ish closely on Monday and do not trigger buy until a close above 715. If you use the resistance/support line approach, the downside target will be OEX 685ish. This is a 45 point drop from the high of 730 and is approximately Fib 0.6 retrace of the whole upleg (730-655=75) from Aug low. The reason it bounced off from 695ish was because of Fib 0.5 retrace. A drop of another 20 OEX points from today’s close of 705 will bring the DOW to 13200, the long term support. These are rough estimates for trade positioning. Be careful about sites who forecast new market high. At the moment, it just isn’t there. Really felt for Flipper who was 100% long on the day after Fed day with a close to 400 point drop in the DOW.
Good Luck
2c
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