04 May 2010

SP Futures Daily Chart

As corrections go its a good start, and the shape of that potential top is fairly ugly as topping formations go.

The Non-Farm Payrolls number is at the end of the this week, and that may overhang the bears a bit unless something exogenous occurs.

Today's sell off had all the characteristics with a flight away from the risk trade and the insubstantial. But in the later part of the day the fear on the ticker seemed to subside and turn into a good old fashioned wash portion of a wash and rinse.

Some believe that this is a 'sign' from the US banking industry to the government that they will not tolerate efforts at reform. That is probably a bit far-fetched.

1160 looks to be a good pivot, maybe 1155. Then we start falling out of the consolidation category into a righteous sell off. Markets never go straight up, and this one is long overdue for a pullback.

The market has run from 1045 to 1215 with no major sell offs save the current action that started in April. That is 170 SP points almost straight up. Trading at 1165 puts it as a correction of 50 points. That's roughly a 4% pullback from the 1215 top, and 30% off the gains from the bottom in February when this leg of the bull started.

Still as a percent from the market bottom in 2009 it's almost nothing, a blip on the radar. So far.

By way of 'sharing a thought,' I'm short, and came into today very short from last night. But I am quite a bit less short right now, but still running a hedged play.

This 'up and down' pattern is pretty typical of a topping pattern or a consolidation, and the kind of action traders like to take when they want to 'wash and rinse' the small players, while they think about which way the market is likely to break.

I don't think that this is overstating it, since this market completed dominated by a few banks and hedge funds on the buying volume. It seems as though volume only shows up on the dips. Like so many traders I am playing the swings in it both up and down to good effect on the short term positions.

At some oint it is going to break down or up and you do not want to be on the wrong side of that.