What the charts say about the U.S. stock market?

Being flat in a bear market when I am a super bear .. now that is a horse of a different color!

 

First off, let me lay a disclaimer on you. I am flat. I got stopped out of my remaining 0ne-third layer on the biggest fake out rally of the decade.

So, I am writing this as a “covered short.” I would much rather be writing this as a short holder.

I have not been willing to chase the decline the past two days — which is confirmation to me that this market is heading lower. I want to sell a rally — with the rest of the world. There is nothing more bullish to a market than sold out bulls. There is nothing more bearish than covered bears.

As I see it, the H&S top remains firmly intact. The U.S. stock market has completed a major turn. The trend is down. We are in a bear market. The 2010 low will eventually be tested and surpassed. The target is the 2009 low.

The retest rally did its job — it reassured the bulls and blew out the bears, me included. Looking at the chart above, however, the market simply traded back above the neckline in one thrust day.

I dearly want to be short. My re-sell signal was the close back below the neckline on Monday. I have used this signaling technique in the past. It is part of my arsenal. If I shorted the market at present levels, where do I protect myself? Above the Oct. 27 high is the most logical spot. No way am I risking 70 S&P points. The re-sell signal I had on Monday at 1249 would have allowed me to at least get my toes into the water again. Maybe not at ideal sizing levels, but at least with something.

So for now I remain a covered bear. Not a pleasant feeling. But, who said trading is always fun and pleasant. And this brings up a point that beginning traders should consider. Does it bother me more that I got stopped out on the rally or that I did not re-enter on Monday’s close? The later is the market decision that bugs me most. Getting stopped out is a fact of life. Not taking signals that should have been taken — now that is a horse of a different color.

$SPY, $SP_F

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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