Nothing really new to report tonight. Much like yesterday, the markets made a valiant effort to take out those key resistance levels and once again, the sellers stepped in to not only take the SPX & COMPQ back below the key 1430 & 3030 levels but they also managed to wipe out all of the earlier gains and then some on all major indices except the SPX which managed to close basically flat at a mere 0.04% gain. In fact, the $SPX printed a nice shooting star candlestick similar to the SPY tracking etf yesterday (which due to tracking error, opening & closing differentials, dividends, etc… does not always mirror the SPX candlesticks).
All in all, the impulsive fading of the pre-Fed rally coupled with the fact that the markets once again failed to take out key resistance does help keep the bearish case intact. However, with the markets closing basically flat on the day, I really don’t want to read too much into today’s action. In betting, they call this a “push”. Neither the bulls or the bears can declare victory today so we’ll just have to wait to see what the rest of the week brings.
Personally, I didn’t add or subtract any positions today. I remain aggressively short and depending on what the market does from here I will either continue to add to my short exposure or start reducing it. I am still waiting for some solid technical evidence of a reversal from at or near current levels before adding any more short exposure, such as a bearish engulfing candlestick or some other follow-thru confirmation to the recent potential topping sticks. On the flip-side, any solid move thru the aforementioned resistance levels, ideally on a closing basis will be my cue to start reducing short exposure. I will consider a close above SPX 1440, COMPQ 3050 and NDX 2733 (the latter two being the 61.8% fib retracement of the move down from the Sept highs) as a caution sign to move towards a market neutral positioning. Market neutral positioning can be accomplished via closing all positions and going to cash or by taking enough longs to offset any net short exposure (or vice versa when net long).