Monday after the last minute market dive, outlook for the rest of the day

[caption id="attachment_765" align="aligncenter" width="500" caption="SPY"][SPY][][/caption]

[caption id="attachment_770" align="aligncenter" width="500" caption="S&P intraday"][S&P intraday][][/caption]

I recall somebody said that the opening is a good indication of retail trader (the non-pros) emotions. After Friday's last minute 40 point drop on the S&P, things couldn't be more orderly this morning. Yes, the opening volume is high, but it's still below that of most of the days last week. Considering that we just witnessed a possible failed rally on Friday, the negativity is expected. So we're continuing to drift downward. That is expected too.

But with the media's doom and gloom without offering anything new over the weekend, I had expected something worse. For example, we just broken the 855 support (the 61.8% fibo retracement target I mentioned) as I'm writing but the fall stopped at 850. There're a lot of hessitation in the selling.

Furthermore, all these testings of support seem like a test of conviction to me. They look too textbook perfect to be real. I don't know, perhaps this is the real deal and the inevitable fall is only being held up by people like me.

In any case, since my prices are still well above my stops, I am not selling on this low volume test of support just yet. There's just too much fear going around this morning to be selling. I'd rather wait til the afternoon. The closing hour today would be a good tell if this bear rally has failed.

Update: It's 11am now and it's amazing to see that we're exhibiting the exact same pattern as Friday morning ... Take a look at the updated Figure 2. The price, the TICK, and even the A-D line are almost identical! A late day rally and then a fake down can shake out many weak bulls or trap some bears when everyone expects a breakdown like the late day Friday. And then a real rally could commence? This is just wishful thinking, don't read too much into it.

Update 2: S&P closed right at 850 today. The market weakened in the last hour. The prospect for a rally is looking dimmer. I hessitated to sell my ABB short puts when it failed to break \$11.10 late in the day. I have set my limit order too low (at bid price) and let the price got away from me. I think this mistake is going to cost me.

[SPY]: http://traderpau.files.wordpress.com/2008/11/2008-11-17-spy.png [S&P intraday]: http://traderpau.files.wordpress.com/2008/11/2008-11-17-spxintra.png