Today is Monday, February 8th and the market pulled back a bit off its highs of the day.

That is to be expected, but what happens in two or three days from now will be important. If tomorrow remains an inside day, that will make the case for a potential good size rally on Wednesday. We will see. I have some numbers that I quickly wrote down earlier. This is in the cash market, not futures. First, if the down trend is really slowing, we will need to get over 1063, if we do there may be a shot to 1071. If 1071 gets taken out, we should see 77-80 on the cash. If 1080 gets taken out, there is a chance we could see 1097-1109.

Those are all bullish scenario’s. I have not really looked at the bearish scenario as of yet. This is just some quick figuring I did and saw for the market if yesterdays rally is a short term reversal day. If tomorrow does remain inside of today’s trading range, that could build pressure enough to hit those numbers I just mentioned. 

The S&P is in a parallel downtrend. It has clear boundaries above and below. The last figure a gave above, targets of 1097 to 1109, will only be met if the boundaries are breached. The other targets long, can be hit in the confines of the overall downtrend.

On the downside, the current limits seem to be 9700 on the Dow and 1040 on the S&P.  As I mentioned last week that a lower close of the index on Friday will turn the weekly momentum chart down. It did and now, the weekly, the daily and the 120 minute charts are all pointing down clearly.

With that said, keep your mind open as to the next move. The market can always rally at any time. If it did come tomorrow, it is in a spot to do so. The retracement from todays market puts us in between the Fibonacci retracement zones that are popular with traders. This is also just a natural pull back from the big late day rally on Friday. What happens from here, we will have to see tomorrows market. The last three hours of todays market was under pressure. If a rally was going to happen, it could make an attempt from here. Tomorrows price action will tell us.

Today, I started a little earlier,  I had only taken a few trades, they were quick and pretty easy. I have been trading the afternoon session, which has been easier for me to get ready, verse a 5 am wake up call. Some day.

I saw a potential runner around 10 am, and closed it out for a small gain, around 1 point.  Having split targets gives you the ability to release yourself from the pressure and more comfortably allow the market to do its thing.  I try and not cry about things like that, but it happens. It did run to where I thought it might, without me for +4 point move. I picked out a few other spots and called it a day.   

Thats going to be it for today. I will have something more interesting to say tomorrow, so stay tuned.

Good Trading, Vince

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Tags: 9700 dow, bullish senario, cash market, fibonacci retracement, split targets