Today is Thursday May 21st and we got a sell off to test the lows.

Well, I thought we might have had at least one more minor move to the upside before we dropped but all I can say is that I was wrong. It dropped like a rock starting in the night trading. The one thing I did say and get right was, that a move down to the 1105-1106 area first and then a move up to 1128 before the next move. Half of it happened the other half did not.

We had closed yesterday at 1109 and had a move up after yesterdays close of about 7 point on the S&P to 1116. The market quickly came down to 1105.25 and bounced off that for a 10 point S&P move. That is what I initially saw happen and so far so good, but the rally failed. I said the market was going to have to stay above the 1105-1106 area and a break of that will send price lower possibly to retest the intra-day low of a couple of weeks ago. That was the other part that happened.

So, we are sitting on now another major support as I see it and will include a weekly chart here for you to take a look at. Just click on the chart, you may have to click on it two times to get it to blow up. There, in the chart is a yellow line and red line right where prices are currently at. I feel, if those lines are broken, you will see a move down to the other lines I have marked. It is a long way, but the market will not really have choice as the panic will set in and the stops will be triggered like a set of domino’s all lined up.

When you see price bars like we saw two weeks ago take place, that is a sure sign that you will see more bars like it in the very near future That was one of the reason’s why I had called for a huge increase in volatility and movement and its not done yet. The best case scenario that we can hope for is a nice bounce up off today’s drop. If it goes down through the marked support area’s on the charts, we will see another large wave of selling and there will be a bit of panic to this one. So all I can say is hope for bounce to help you lighten up on long term positions, if you so choose. That is what I would do and I am sure it is what a lot of other people are going to be doing as we go forward.

In the market sentiment area, the new numbers from yesterdays release are down another 4% from last week at 43.8%, a neutral reading. That does not mean that the market is going to stop, we will have to let it make its own mind up on that for the short term, (bounce or no bounce).

I feel exactly the same as I have all along, about this market selling off. I had called for the rise and have been calling for the drop overall in the long term picture. This is not a surprise in the slightest. I feel the market will find its way down to the mid way point of this last multi month advance at its very best which stands at 928 to 865. Again, that is the best case scenario that I have been calling for from the beginning.

Taking it one day at a time, today I took a few good trades and ended up with solid gains. I have a video of my first trades of the day in the video below. My first trade was -7 ticks as I came in late for the move. I did increase my stop size because of the volatility and next trade was for 3, 4 and 5 S&P points.

I promised to continue with the trading lesson I started in yesterdays blog but will have to pick up in tomorrow edition. Good trading and be safe.

Related posts:

1. Wall Street Plunge, down 266 !
2. Wall Street Rally – Mission accomplished
3. Reversal on Wall Street
4. Big Day on Wall Street & Day 6 training
5. Market continues sell off & Nice smooth day of gains

Tags: major support, sell off