Heading into next week, it's no secret that the momentum lies with the bears. Let's have a look at the daily S&P chart to see what are the important levels that could come into play this week.
In my last update on the markets, I had pointed out two levels of support for the bulls - (a) the bottom of a downtrending channel (b) the 1294 level from the April lows. The first of these support levels was broken on Friday but the second one still remains. That remains the first level to keep an eye out for this week. I wouldn't be comfortable holding too many longs overnight until we break the 1318 level, so there is another key level for you.
The McClellan Oscillator, an indicator the regular readers of this blog are well familiar with as we have used it often in the past to detect overbought and oversold levels, is still not at oversold region. But another down day, and we will be there. When we get there, disciplined longs can get in for quick plays but while doing so, do not forget that the momentum lies strongly with the bears until 1318 gets broken. Respect that. If you want to go short, wait for some consolidation or low volume move upwards here.
Take care and good luck!