A Quick Synopsis...

Remember I said the initial reaction to the Fed is almost always reversed? What was the reaction at 2:16 p.m. yesterday? For those who can't watch the market all day long, it was a huge surge in buying, the market still closed down but the initial reaction pared the losses significantly. And today, the reversal of that as is commonly the case. I can't remember the last time this little observation didn't hold true.

Do not under-estimate the seriousness of today's break down from the ascending wedge, where we sit-at the top of a right shoulder, thus far would make today synonymous with approximately 5/21/2008. You should back up the charts and look at that time period so you can see how the market reacted in the "Great Sell-off"-a 50% decline in the market. That way when you see a 4 or 5 day rally/bounce you will have historical context to put it in and not be scared out of a good short trade.

The break of $110 (area) is significant, lets see if it holds, if not today, then very soon. The $109 level should be next support, if that fails we have officially reversed the trend, although that appears to be a foregone conclusion. Once the trend is reversed, it will force traders, trend followers to close out longs, thereby adding more supply to the market/lower prices. It has been my plan to be 75% short on the break of the head and shoulders-on the SPY it would have been at $104-ish, but we have a new low to take out from July that is at the $101 area. I never want to be fully short, I always want some cash to play bear market bounces and to hedge if need be. Even in a sure thing, I would never put all of my eggs in one basket.

The implications of this failure are severe. I would think, eventually we will see new lows. Tonight I will publish my expectations for the long range and you can see how you feel about what I present and begin your tactical planning from there. If you didn't get in today, you didn't miss the bus, there's a lot of opportunity here. Still risk management is essential, having the ability to go short this market is essential and if anyone has questions or fears let me know. After all, markets fall faster then they rise and this one I believe will fall further. For many who have been members for awhile, you know my long term perspective and this is about what we have been expecting and waiting out in many cases.

Today is much more important then the averages will reveal.