Market view

As expected we got a very nice sell off early this week (Tuesday) with the markets down the most since the last 6 months!! My mechanical trading system got a sell signal as we closed below 1330 SPX and the same with Russels and QQQQ. For now the trend has changed and I got lots of short positions at 1330 and added few on little spike to 1333.

I think the correction has begun and I'm looking for a lot more downside over next 1-4 weeks. What I found interesting is the VIX broke out of a huge downtrend of the falling wedge and closed with a bullish candle.

Also Russels and NYA made the touch of the top trendline as posted in earlier posts and we got smacked down from this level which is very bearish. The volume to the downside was great and very bearish for the markets.

As you see the SPX closed right at or near the big trendline since August/September 2010 lows. When we break this level expect some massive massive sell off.

I personally think that we near term will have a bounce as we wont just sell off only - but we should have lots of these good contratrend bounces over next weeks - but we should sell off agrressive on all those bounces. There is a possibility that we test 1329-1330 area , but I dont think we will move higher. The short term trend is for now bearish and on short signal and wont get a bullish signal until we break above 1330ish level with some good volume. So look at this area closely..until then the trend remains down and I still expect us to see 1180 area sometimes in March. You should be hearing lots of US debt ceiling and US debt near term with the Eurozone debt crisis and risks in middle east near future.....

Have a nice day