What a day ....

Yesterday
Well yesterday was quite a scary day if you are holding. First anyone who went long off the 800 had to make a big decision yesterday, stop loss out after breaking 800 or stay with it for a wider risk margin. On the flip side if you were short what did you make of that rally at the end there? Did you cover into the close after seeing the increased buying?

I am sticking primarily to small trades at the moment, nothing more then 3-4 hours therefore minimizing risk and give you a bit of extra gains. I would not try to trade this otherwise here.

So lets talk about some of the technicals, we had strong volume yesterday and created a second spinning top. I for one look at yesterday very bullish - why you say? All the volume came in at the last rally that broke back well above the 800, even taking out 808 and closing fairly close to the 817. I was quite wrong on the 795, I had seen this type of setup in the past and really would have expected further drops after a break of 795 regardless of possible 50dma support.

Now this was also a perfect bear trap, first run the stops of the longs, then make the bears think they can scale back in, rally and you have just taken out both. Bulls are now more committed and will assume a wider risk margin going forward, bears will now just say "ok lets wait until we hit major resistance again".

Today
The chances of creating another spinning top are quite slim so expect today to make a bit of a move and close 20 pts away from our most recent close. While we are still overbought, the market got the lower boundary retest out of the way now so it could create new highs from here. I had said that I feel the 820-828 range should represent the upper ranges and it seems I may have been wrong, our next level of course is quite important and will require a lot of work.

There are 2 numbers that could come into play, 839-842 or 846-848. This range represents a major point - some of you may remember my posts related to Elliot Wave (yeah I know I know). There are many non-believers out there in relation to that, regardless thus far we have been able to apply this theory on the long term. If we apply it here and properly recount our waves this range would mark the end of corrective wave 4 (re-read my beginning of march special for wave counts). On the bullish side, if my January wave count is correct this range is a mere first stop for a 3 wave correction bringing us above the 900 range. How it works out remains to be seen but I wanted to re-emphasize to navigate with caution through these waters. Due to our extreme ranges at the moment you really want to make sure you are on the right side.

The only way I can see us trading towards the downside is through fundamentals. If that is to occur we should break yesterdays intraday low to start the retracement we have been talking about. A move towards the downside should give us at least 3 days of continuation so if that is to occur you may have a decent trend to trade (that still requires protection heh).