The DOW closed below 10,000 again for the fourth time since May. 10,000 being a big psychological number it will increase the unease that the bulls are feeling. While a slightly positive jobs number in the morning pushed the markets higher, sellers saw it as an exit opportunity and came in strong right before lunch time. While SPY is still holding above the ascending wedge it is only barely doing so with selling volume being much higher than buying. I have a short watch list both bullish and bearish positions which I have taken from the master watch lists you can access above. I know I say this often, but it is important to be ready for any scenario. Looking at things from a long term perspective the S&P has just pierced the 200 moving average on the monthly charts that it recaptured a year ago. Unless we see some buying action by next Wednesday it will be the second time that it closes below the 200 in 3 months. Last time this happened we saw a rally for the entire month of July. These supports not only become more significant as they are tested, but weaker as well; there are simply less committed institutional long term buyers that will have the conviction to hold as these critical levels get tested. Simply put – a break of the 1000 level in the S&P would surely set off a large wave of selling not unlike the one we saw in May that caused most hedge funds to post a loss for the month.
On the short term a break of 1039 on the S&P could be an opportunity to get short in some weak stocks as it would signal that the market is probably headed to the next support which is 1010. Both fundamentals and technicals favor further downward movement at this point. Some might say that things look their worst before they get better, let’s hope for the good of our society that they are correct. As far as making profits in the markets, risk management is paramount as well as having an iron stomach and Shaolin monk like discipline.