Tuesday - After the close

If you traded all day, you would have thought the bulls were feeling pretty good out there. But looking at the close, the candle's red - we closed below where we opened. Still, we made a higher high and a higher low than yesterday, so "up" it is. Tuesday's high - 871 on the S&P - is a critical resistance for the bulls to tackle. Right on the heels is the R1 (873) and the 20-day EMA (875). If that gets broken, this bear flag might run to 940 before it takes a breath. I actually think that's fairly likely, as the buying has made light of some key resistance on it's way up the last 3 sessions. In fact, if we can get to 940 fast enough, maybe we can turn this into a bottom, but I'm talking two sessions. If it takes more than two, there won't be enough momentum to avoid the vacuum created by those nasty 740-750 low points.

At the low end, today's low, 807, has to be held to continue the bear market rally. In fact, if we get that low, which seems pretty unlikely right now, there isn't much to catch it before we have another historic drop. Just doesn't seem to be in the cards for Wednesday - too many support levels along the way. I think the bears would consider it blood in the water if we just had an inside day, or if we couldn't take out Tuesday's high.

I think the bulls enjoy another 3-5 days of higher lows. Watch for the VIX to drop to 52 as the S&P approaches 940, and then we'll see whether greed or fear wins. I actually think that this is the war, not just the battle - whichever takes the price at that 940 range is going to determine the market direction for the rest of the year.

The portfolio did well today, up another 1.0% from yesterday. Same set of stats, though - 4 winners and six losers (including one that got stopped out). In fact, all the gains have come from ACM, and it's already exceeded it's target price by 3%. If it ain't broke, don't fix it.

On my side, I'm too depressed to add them up right now. I've got to recon the losses I'm carrying on shorts with the opinions above. Curiously, the opinions are mine, and so are the underwater shorts.

Joe