How Confidence In Short Entries for Stock Indices Grows

click charts to enlarge

The charts included above are of the daily cash S&P 500, daily cash NASDAQ Composite and daily cash Dow Jones Industrials. It seems we can sum things up quickly and simply here today. These major indexes have now seen the major trend line connecting the March and July lows breached as well as their respective 50 day moving averages. These are not good closes today, unless of course a trader is short.

We believe these to be levels of significance that have now been broken and provide another signal that lower prices are on the way. There may be a bounce back upward in price but it doesn’t necessarily have to do so. We would view bounces, and we will be watching for them closely, to be opportunities to suggest additional short entry approaches.

We would also like to point out that the cash Dow Jones Industrials has not penetrated its respective trend line or 50 day moving average.

We are inserting the S&P 500 section from our last Trade Focus edition.

S&P 500 (Dec. Emini) -- Last week we ended this section saying that next level that may serve as an objective is the .500 retracement from the October 2007 high to the March ’09 low which is approx. 112625. We do not see a long entry suitable for this near of a possible objective. Certainly it could go beyond but we will watch for developments that are more indicative. We do, however, believe that if this “bull run” is nearing an end that short entries can be initiated with intraday penetration of 106625 or with a close at or below 106925. Suggested stop protection for this short entry approach should be intraday penetration of 110275. We believe another short entry approach for new or additional short entries would be with a close at or below 101150. If this short entry approach is elected we believe stop protection should be intraday penetration of 105725. We will update retracement levels following additional pattern development.

Good Fortune and Good Trading

Jeff and Diego

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.