Market Commentary:

Today the bears attempted  a coup de grace on the bulls… and succeeded with stunning ease. Several critical areas of support were broken, and  volume, momentum, trend strength, and trend quality indicators either turned bearish today, or very recently.

This is not a market to be long unless you are trying to make some cash using covered calls on high yield stocks. If you trade options, it would be a good time to write some call options, or for a less risky strategy, utilize some protective puts.

Technical Analysis

Taking a look at the chart below, you can see the fibonacci 38.2% retracement level around 870 corresponds with a recent support level. That level was broken today on increasing volume.

Speaking of volume, take a look at volume levels during the late December rally versus the volume this month. Volume has been much higher during the pull back, indicating the bears are still clearly in control of this market.

Strong sell signals on the ADX and the PPO complete the coup.

Look for some support at the Fibonacci 61.8% retracement level around 820, and then again around 800. I would expect to retest the early December 2008 lows of 750 by the end of February, and for the Market to remain mostly sideways with a slight downward bias between March and May.

How To Make Money In This Economy

If you want to lose money, pay attention to the economy, no attention to the "bail out", and no attention to the Fed, economists, or any other governement official.

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