Weekly Market Review: July 10, 2009

We finally broke below the well-known support of 880 for the S&P500 (Figure 1). However, I don't think we should short aggressively just yet for the following reasons.

  1. Lack of volume in the breakdown of support. As I said, we need some momentum to break our trading range. Even though the price has shown us the card of the market, the volume is simply lacking to show us any momentum. Figure 1.
  2. Volatility is still below 30, Figure 3. Which means we're experiencing a systematic move and not a dive just yet. So do expect some choppiness as we go downward to stop out the retail traders as usual.

In all, it's obvious to everyone that the bears are in control now. However, we need to maintain nimble positions as with these past few months because this downward move is expected by everyone and it won't be a free ride downward.

I'll preferably ease in the shorts in a controlled fashion rather than betting the farm on it. However, don't discount the scenario where we have a sudden and violent down move all of a sudden.

[caption id="attachment_1572" align="aligncenter" width="500" caption="S&P 500 ETF"][S&P 500 ETF][][/caption]

[caption id="attachment_1573" align="aligncenter" width="500" caption="S&P 500 ETF"][S&P 500 ETF][][/caption]

[caption id="attachment_1574" align="aligncenter" width="500" caption="S&P 500 ETF"][S&P 500 ETF][][/caption]

[S&P 500 ETF]: http://traderpau.files.wordpress.com/2009/07/2009-07-12-spy.png [S&P 500 ETF]: http://traderpau.files.wordpress.com/2009/07/2009-07-12-spy_prop.png [S&P 500 ETF]: http://traderpau.files.wordpress.com/2009/07/2009-07-12-spx_vix.png