Wednesday, June 3, 2009
Some Type of S&P Top is in; June 3, 2009
Today's selloff got my attention. Not only was breadth and internals of the market weak with 85% of NYSE volume to the downside, and well over 400 S&P stocks trading down, but gold, silver, oil and the euro did strong sharp reversals today. This was a massive across the board selloff that also appears to be falling impulsively. Also, today's downturn has created a bearish divergence on the momentum indicators with the most reliable one being the RSI (see above daily S&P futures chart).
Although it seems a bit shallow and premature to call the wave 3 underway, it does appear that a great risk/reward trader exists at current levels on the short side. I added 10% more to my S&P short position with the SDS early in this morning's trading. My stop loss for this additional position is just above today's highs (949 in the futures). As long as I'm not stopped out, I will watch the structure and strength of the decline to determine if it's possible wave 3 is underway now, or if this current set back is just a pause in the wave 2 uptrend. Right now, I'd have to say it's the latter.