It was one-way traffic on the Street today as the bears simply steam rolled the bulls. Usually, when the market gaps down above an important resistance or below an important support, the gap does not get filled, at least on the same day. That is exactly what happened today with the S&P gapping below the important MA(20) level and staying below it. If I was forced to pick any positive for the bulls today, it would be the comeback, if you can term it so, in the last 45 minutes or so of the trading session.
With today's action, the markets are well into oversold territory as shown in the McClellan Oscillator charts below. We will have to wait and see if this actually means anything to the markets with the kind of momentum bears have with them at the moment.
Even if we do get a bounce tomorrow, today's action calls for a change in strategy. Buying the dips, which has worked so well so far, is officially over and dead. Also, I have been playing mostly breakouts through this rally. Well, that's also over. Sure, we will still have breakouts in the market but if the trend of the overall markets is down or choppy, most of the breakouts would fail. IF I plan on going long, I would rather buy off support. I did not make any move today and am prepared to give the markets time to sort things over. The oversold market conditions meant that I was not comfortable going short and I was not going to try and call a bottom to the massacre out there.
Take care and good luck!
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