I thought everyone might like to step back and glance at the long term perspective. This is a monthly chart of the S&P 500 dating to 1998.

Notice how 1,200 seems to play a critical role as support. I also drew downward arrows on peak volume. The relationship to high volume and severe declines stands out to me.

Where do you think the S&Ps are going from here?

Disclosure: I am long SDS, the Ultrashort ETF on the S&Ps.

__________________
Shaun Overton
OneStepRemoved.com
MetaTrader Programming & Strategy Development

Hey Shaun,

Great post I agree that it is always important to keep the long term view of the market in mind no matter what timeframe that you are trading.

I agree and I think your chart shows very well the importance of the 1200 level. For me the near term direction of the market is dependent on what happens with the range (which is looks like we are breaking out of today) marked by the 1291 level on the upside and 1263 level on the downside.

If we get a clear break of the 1291 level then my bias will be or the market to continue the upward move we began during the summer. If we break the 1263 level on the other hand then my bias will be for a test of the 1200 level that you have outlined in your chart.

If we get the close above 1291 today and I would like to see confirmation on Tuesday when the market returns from holiday before calling that a clear break or not as I am always skeptical of light volume trading week moves around holidays.

From a longer term perspective if we continue to move to the upside through the 1291 level then I am waiting to see what happens with volume before I make a longer term forecast. If we continue to see declining volume into the upmove then I will view this as a correction and will probably look for the market to reverse somewhere around the 50-61.8% retracement level for its next leg down.

If we get volume rising with the upmove then I will expect it to continue. A lot of this also in my opinion hinges on what happens with the financials and oil.

Best Regards,
Dave

__________________
Disclaimer: Trading is risky and can result in substantial financial loss. As always my posts are simply one traders opinion and should not be taken as trading advice. I am not a financial adviser so everyone please do their own analysis and take responsibility for their own trades.

We're currently in a very dangerous technical area with NFP coming out tomorrow. There is modest support at today's close near 1,230. My suspicion is that with today's larger volume and the shaven head close, a lot of downward pressure remains.

If tomorrow comes out with a bad number and the S&P starts falling another 40 points like it did today... there's nothing between it and 1,050.

Keep your fingers crossed for good news. Otherwise, this is going to be a bloodbath.

__________________
Shaun Overton
OneStepRemoved.com
MetaTrader Programming & Strategy Development

Today looks like the S&P is going to close almost exactly at 1,200.

I'm probably setting myself up for a public lynching saying this, but here it goes: the probability of an imminent market crash is huge. Nothing in this market shows reason for optimism. The fundamentals are horrific, the technicals on the long term S&P are wildly bearish and we're coming up on crash season (October) to boot.

It's not a certainty, but I will be very surprised if we finish out the year without a major crash.

__________________
Shaun Overton
OneStepRemoved.com
MetaTrader Programming & Strategy Development

And now the bloodbath is upon us... next stop, S&P 1,000

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Shaun Overton
OneStepRemoved.com
MetaTrader Programming & Strategy Development

Hear, hear!!!

shaun, shoot -- could you shed some more insight on what you feel constitutes a "crash"? like possible bottom levels?

i'm not sure if we're going to see a crash like a "OMG run for your lives" type of crash. i'm expecting an accelerating decline, but i think it is going to take a few years before it gets really, really bad and there is not an uptick in sight. 2010, if i had to guess, though obviously that is quite far out and too many things could happen between now and then to say that with much certainty.

great day for gold, though.

Good call Shaun. What a wild 3 days of trading.

Best Regards,
Dave

__________________
Disclaimer: Trading is risky and can result in substantial financial loss. As always my posts are simply one traders opinion and should not be taken as trading advice. I am not a financial adviser so everyone please do their own analysis and take responsibility for their own trades.

Simit,

I don't know about bottom levels. All I see on the chart are price targets. The first target is 1,050 and the distant target is 900.

I would say a crash already happened yesterday. It would have been many times worse if the index were priced in ounces of gold instead of dollars. A 10% rise in gold with a 5% drop in the index... that's a crash.

If it weren't for central banks around the world printing money, the market would be free falling. Instead, the nominal dollar value is still falling, just not nearly as fast as it otherwise would have.

I also think from a fundamental perspective that this is the start of long decline. It's hard to guess prices, though, since we're running such extreme inflation and it's all priced in dollars. My confident guess is that whatever the price is, it won't help anyone's retirement accounts.

I saw a panel of "financial experts" on CNN last night encouraging everyone not to panic. Some gems from the discussion:
"The market often bounces back."
"This is the worst time to get out because the market is down."
"Getting out now locks in your losses."

As a dedicated news contrarian, this makes me all the more confident that it's about to get worse.

__________________
Shaun Overton
OneStepRemoved.com
MetaTrader Programming & Strategy Development

yes, i agree with your assessment, shaun. central banks are making gutenberg proud with how much they've been using the printing press of late. gold and silver are where it's at IMO over the next few years.