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 Current Market Status (update) by Jason Leavitt December 11, 2008
Heading into this week our bias was to the upside. We had many very good breakouts Monday and some follow through Tuesday, but as has been par for the course, no follow through was achieved after that. I was asked via email how my trading has changed with the current market conditions. You all know the answer. My entries tend to be the same or very similar, but instead of being able to hold for several weeks, I'm only able to hold for a couple days at most. That's just the way it goes. The overall trend is down, so when I go long, I know from the onset I'm fighting the prevailing trend. So right from the beginning, I'm in a defensive posture and not willing to let things go against me too much. As soon as I have a nice profit, I'm taking partial profits, and if the tide starts to turn, I'm out completely. I wish I could hold longer. I wish I could buy and go skiing for the week, but that's just not possible right now. We take what the market gives, and right now the market is offering many opportunities but those opportunities don't last long. Let's review our index charts. On a shorter time frame, the Dow is trading in a small bull wedge (red trendlines) within an uptrend, but on a bigger scale, it's trading in a large bear wedge (blue) within a downtrend. Since support for each pattern crosses right here, tomorrow could be a very important day. A line in the sand is being drawn. The bulls must step up or I'm afraid that Nov 24 gap will fill.
The Nasdaq has gotten rejected from our target/resistance level (1600) and is now heading down within a rising wedge (blue). This is a bearish pattern within a downtrend, so being long is not wise. I would only trade against the prevailing trend on a bounce, not up here near resistance.
The S&P looks like the Dow. If you only look at the last month, we have a potential bull flag within an mini uptrend, but if you back up, we have a rising wedge within a downtrend.
The Russell moved up to resistance created by a trendline drawn from the mid-Oct top and early-Nov top and then got rejected. It's now on the verge of breaking down from a rising wedge (blue).
The Bottom Line… Yesterday we noted the potentially bullish small consolidation patterns but with the prevailing trend being down and the unfilled gaps below, we had to be conservative. I'm not going to call tomorrow a do-or-die day, but it's pretty close. These bearish wedge patterns can't resolve to the downside if this mini trend up is to continue. And of course if the market is going to leg down again, we'll go short. Why fight it? Have a great night. Jason Leavitt
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