• The S&P 500 has been somewhat stable during the trading session on Tuesday, as we have reached the 3800 level.

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• This is an area that has attracted a certain amount of attention previously, so it’s not a huge surprise to see that the market is trying to bounce. I wouldn’t expect much, but we are oversold so at the end of the day a little bit of a short-term rally does make sense.
• Having said that, I also recognize that it probably offers a nice selling opportunity going forward. With that in mind, I’m going to be looking at the charts daily, to see if we’ve tried to rally, but failed.

One area that I would be particularly interested in would be right around the 50-Day EMA. This is because there was previous support in that area as well, so it all ties together quite nicely. Furthermore, the 3900 level and of course the 4000 level both could be interesting as well. As we are in the holiday season, I’m not looking to take intraday traits, but would be willing to trade the daily candlesticks. I also am cutting my trade size in half, just since it could be so volatile, and therefore, we could get shaken out pretty easily. After all, this is a situation where volatility is probably going to go through the roof if we get any type of surprise announcement.

We Are in a Downtrend

The alternate scenario of course is that nothing really happens, as the market continues to look for some type of reason to move. After all, most big-money traders are looking forward to taking 2 weeks off, as the stress of trading, all year certainly takes its toll. A lack of liquidity causes major headaches, so unless you absolutely must make up for poor results earlier in the year, you probably are going to be moving around millions of dollars to make things happen.

Unfortunately, a lot of retail traders get sucked into these markets and get in the year on a bad footing. Be cautious but recognize that we are most decidedly in a downtrend overall, so don’t be trying to pick a bottom here, even if we are likely to get some type of short-term relief rally. There’s just nothing out there to move the market to the upside for a sustainable amount of time.

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