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Market Update: Early Reversal Failed (see comments)

November 12, 2008 12:05 PM

Well, I posted that they tried to reverse it early but I also said “this smells a bit fake”. It seemed premeditated to open it lower and reverse it. I said to be either long above 8481 or avoid and that 8580 needed to clear to “confirm” the low and go positive. it backed off just under that, then cleared the early low. I said once that low cleared “we are going down”. It spiked another 100 to the downside.The early low was a direct hit on the daily trend. Once that cleared and the early reversal attempt failed, I was very confident we were in trouble right then and there.

I am not sure how low we will go today. The lows put in on the financials is just below. Whether that is critical here, i am not sure, but it certainly will raise eyebrows, at the least. There is a lot of support in this 8400 range. But I am not a fan of support trading. We either make a firm low and reverse, or I consider it nothing more than a support bounce.

Keep in mind this is a close day. I did mention that last night that many of these trends go three days and a reversal attempt was far more likely tomorrow, not today. However, if we can get a firm low today, positive is not impossible, but better be careful as i do not like the fact that the reversal attempt could not hold and the trend broke. This doesn’t look good.

11:48 Update: We have what appears to be a firm low at 865 on the SP. I believe this low has to hold. If it does hold and that is the low, closing positive appears possible. If it does not hold, especially near the close, watch out as complete panic is not impossible.

Close Update: Close days are VERY risky. You either win big or get crushed. That is why I always mention “close days”. We had to close positive today. Either the lows were going to hold and we would make a huge rush to positive into the close or we would likely close at or near the low. The safer trade, IMO, is to wait for close days to confirm a low, then look to be long above that low. Anyhow, if you attempt to trade a close day, know that one or the other is very likely. So it is important to understand that.

Written by Tom@StockBlade.com · Filed Under SP Futures 

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