SPX 3-7-12

We have rallied for 3 months without much of a respite. Yet, the buy buy buy market took a break yesterday selling off about 1.5% and all the media pundits were crying about such a horrible day. Seriously?

Let's cut to the facts. A rising wedge has broken and now we sell until we find a support line that holds a few times and then we'll be back to mindless buying once again.

The support line that held yesterday was the 34 dma at 1342.82. Of course, there was a buying surge at 3:50pm yesterday that got us above that line, and the futures pretty much rallied all night to 1348ish. It appears to be a two push up and a bear flag so perhaps the overnight games are over and the dumping will begin at open.

If the 34 dma should fail, my near term support lines are 1325-1326 formed by the gap up on 2/3/12 followed by the 50 dma at 1321.35.



Hourly chart on the Futures is already starting to break down out of the bear flag however, I am concerned that VWAP (orange lines) will keep the market from going down. Only volume busts VWAP and with the exception of yesterday, volume has been non-existent on the downside. Once it kisses VWAP, bears are toast. Yesterday, despite the massive selling, we managed to avoid kissing VWAP, and thus, could continue selling without interruption from the mean reversion traders.

Bears are also fighting against the fact that yesterday was a major distribution down day. NYSE decliners were >2700 etc. Usually such days are followed by a bounce.




Lastly, the iPad3 press conference is today and we all know that AAPL can hold up the NQ which will in turn, keep the rest of the market afloat. AAPL made a nice panic bottom yesterday, early on, and almost made it back to green territory by close on this news. Anyone else find it odd that AAPL (now the largest market cap in the world) still trades like a penny stock with crazy bid/ask spreads?