Plan for Thursday, August 16, 2007

Summary

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The BPSPX is at levels not seen since March 2003, when the markets finally recovered from the bear market of 2000-2002.
VIX is at 3yr highs, but not 5yr highs. Likewise for the $SPXA200.
Another measure of volatility, the ATR, is currently at 26.75pts for the SPX (34.65 pts for ES). The scary thing is that the ATR is on an 1month uptrend, so this looks like it might get worse before it gets better.
The charts of APPL, GS, GOOG, BIDU, CROX are all busted up. Even RIMM looks like it wants to fill that monster gap. The only bright spot was IBM, which managed a late day recovery.

Otherwise it would seem that the market is acting like a bear market. S&P500 (cash index) would have to close below 1400 for this to become officially labelled a correction, and a close below 1244 would officially put us in bear market territory.

We remain in oversold conditions, so the dead cat should make an appearance soon, although I have no clue which day that will be. We will probably know that the dead cat is here when the "sell-the-rallies" theme no longer works (for the day).


For ES, resistance zone is at 1430-1435, and 1442-1446. 1427-1428 would be a 50% retrace of today's afternoon selloff.
Support is @1375-1380 - this is the bulls last stand. Possible support @1400, since the market has an affinity for round numbers, but the bears have been vicious for most of this month, so, it's not clear whether the bulls will prop up 1400 or not.
QQQQ should also find some support at its 200d SMA, which is @45.31. Not quite sure if that is enough to prop up the rest of the market, but something to watch.

If the market rallies, buy only if the retrace is 38.6% or less and only after the retrace clearly reverses.
Otherwise, I will look to sell rallies - especially a double top at the end of a 10pt run !!! (That was such a noob mistake.....)