Today's Comments (Short Term Outlook)                             Printer friendly

We should have rallied, but didn't We were expecting a big negative open yesterday based on Intel's poor guidance after the close on Tuesday, and we did see a open to the downside, but the reversal ran out of steam.  I was hoping for more off a washout type sell-off that would lead to a capitulation reversal by the afternoon.  It looked like we were going to get it as the Dow was down over 100-points in the morning, and then up 100-points in the late afternoon, but instead of closing strongly, we saw a nasty sell-off in the last half hour of trading.        I talked about the S&P 500 breaking below the triple bottom and that possibly being what we needed to see to spark the reversal rally.  But instead the S&P 500 closed below the triple bottom and if something doesn't change in the next couple of days, I am going to have to go back into serious defensive mode again after poking my head into stocks for the last couple of days.  If we can't close above this level the rest of this week, I will stop playing the game of trying to catch a bounce in a down market, and just play the safety game, because technically things look bad.                                       Chart provided courtesy of www.decisionpoint.com  With the break of the triple bottom we now have what appears to be a head and shoulders pattern break.  The downside target of a H&S pattern is the same length from the neckline to the top of the head which is 1375 to 1575 or 200 points.  So, if it is a true H&S, the downside target would be 1375-200, or 1175.  Ouch! We have two strong historical pre-holiday days in today and tomorrow, which could help, but seasonality has not been something we have been able to count on during this correction.  We are due for some positive action but once again there could be a line of those waiting to sell the strength.  I am sensing my sentiment getting negative and since I am part of the herd, I am aware that this could be a positive sign.  But the recent smart money and overbought / oversold indicators have backed off extreme levels without giving us any upside.  That makes me nervous. That's all for today.  Don't get too bold just yet.  Caution is warranted particularly while the S&P trades under that neckline.  If we see a quick move back over the neckline, we could see a short-term rally ensue.  See you tomorrow. Have questions?  Visit our message board for answers.  Would you like to be on our email alert list?  We will send you an email when there is a change to our asset allocation or market outlook.  Your email address will never be given out.  Read our privacy policy.  By signing up you agree to the TSP Talk Terms of Service.  More details below **. Are you bullish or bearish?  Join the Weekly Sentiment Survey. Like what you're reading?  Tell a Friend about us.