Thursday, May 7, 2009

A Quick Look at the Indices

As I sort of suspected, volume did come in very heavy today and all the indices definitely put in a distribution day. Now normally, one day of heavy volume selling isn't a death sentence to the bulls, but considering this one happened right near the 200 day moving average for the Nasdaq and also accompanied bearish reversal bars, I think this one day could have some significance. I am not ready to jump around and short everything in sight - in fact, I can almost guarantee I will do nothing tomorrow. However, on the charts below, I highlight some important short-term support than the bulls will want to see hold. If these areas don't hold, then things get more serious, especially if volume stays heavy.

S&P 500
Nasdaq
Financials

Looking at the VIX, it is still in a general long-term area of support and is coiling in a falling wedge, which is typically bullish. If this would happen to break out higher soon, I would take that as another sign that a pullback is at hand, perhaps a serious one.

VIX
ALL CHARTS FROM TELECHART 2007,
COURTESY OF WORDEN BROTHERS, INC.

All this being said, the futures are up right now after the Stress(less) test results were released after-hours, so tomorrow will likely be very volatile. That's why I probably won't be doing much Friday. Today was bearish, but there isn't enough evidence yet to know for sure that this is a top, and I certainly still don't feel comfortable buying a pullback because we are still very overbought. I just have a feeling some traders are going to get chopped up tomorrow. Good luck Friday.

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