Last week’s posting highlighted the “fight for dominance” between “da Bulls” and “da Bears”. Well, we have a victor…It’s “da Bears”!  We also posted on PTG Twitter potential for a Head n Shoulders Topping Pattern in formation  http://twitpic.com/cu93q8/full  which if  plays out measures down to 1600 (160 SPY). We are long of  SPY June 160 Puts.

As highlighted in Friday’s strategy, the key line-in-the-sand for bulls was 1638-40. Defense of that zone proved too much for the bulls as “long liquidation” hit hard and fast once broken. Market On Close (MOC) sells of minus $1.5B accelerated the liquidation into the closing low. We might add here that last week saw a string of daily sell imbalances into closing print which indicates that large institutions are in distribution mode.

Since the prior session’s closing price was at the lows, momentum may take price lower before finding some stabilization and bounce attempt. IF 1626.25 is violated to downside, projected targets measure down to 1612 – 16 zone…THEN we would look to be responsive buyers in that zone for a reversal opportunity. Any rally attempt has potential to retrace back to 1640-44 zone.

Remain disciplined and flexible to both long and short trade opportunities. Volatility is back for intra-day traders, so we must take full advantage of recent expanded trade ranges.

Good Trading…David

 

Habitude Five:
I think in terms of probabilities. I do not know, all I have are probabilities. Probabilities are at the core of my decisions. Through consistent application of the probabilities, I will win.