Today we have breach of the golden uptrend in Spy . Last time this trend was challenged I stressed that next time it is touch the odds of bounce back is much slimmer. Well today is the day. Trend has breached with no sharp bounce back. Meaning that unless we open higher with a gap tomorrow. We are going to see some significant pull backs in the market. Is this a crash and burn kind of situation? In my opinion there is no case for that as of yet. However, personally I wouldn't open any position unless we have a resolution one way or the other tomorrow.
Even though breach of this trend is significant, bears have to keep two key points in mind:
1- There is lack of confidence in bears. I don't blame them over last 15 month any slightest pull back was either resolved by feds pumping the market or dip was bought drastically. There has been so many investor that got burned by shorting stocks over last few month that there is much less confidence in the practice these days.
2- Capitalism is dead in US stock market. All it takes for administration to announce another round of stimulus or to post pone tapering and market jumps up. However, given that lots of gov official have liquidated their portfolio recently it is less likely that they try to push the market higher.
So as always in situations like this I would suggest to keep an open mind and remember to analyze your individual stocks and sectors you are investing in as Spy is just an indication for general market movement and its highly skewed toward very specific stocks. In other words this analysis is useless on its own unless you are investing in Spy!