Market Is In Trouble – The 100-day MA Will Be Tested Today

Posted 9:20 AM ET - Yesterday the market took a tumble and we saw the second round of profit-taking in less than a week. Asset Managers will pull bids knowing that they can enter at better levels. Technical support has been breached and we will see more selling in the next week. The 100-day moving average will be tested. I've been warning you about this since Apple posted its earnings. Once the mega cap tech stocks had reported there was nothing to attract buyers. The threat of higher interest rates and the debt ceiling will loom in September. Politicians can’t agree on anything and this battle will come down to the wire. Healthcare reform and tax reform are in limbo. When DC is on vacation investors get nervous. The next two months are historically weak for the market. Yesterday I shorted the S&P 500 and NASDAQ E minis on the open. I also bought VXX calls and SPY puts. I exited my futures trades with a huge profit and I will look to re-enter today. I still have my option positions and I believe this decline still has room to run. Swing traders should have closed their out of the money bullish put spreads. The market fell a great distance and if you don't have bearish positions on you should wait for a bounce. SPY $243.80 is a good level and you should use that as your stop on a closing basis. Day traders should wait for the bounce this morning to stall. Bearish markets open on the high and close on the low. Bullish speculators are licking their wounds and they will not buy this bounce. We've seen a couple of 30 point S&P 500 drops in the last week and they will be gun shy. I will be trading from the short side this morning and I will wait for the rally to stall. If the market grinds higher all day - I will stay sidelined. I feel that the rug could get pulled out at any moment. SPY $243.80 is the low from last week and that is a resistance level. I would like to get short and lean on that. A buyer’s boycott is likely and the market will gradually drift lower. We could hit major support at SPY $241.50 today. If the market stalls at that level today I will take profits into the weekend. If we blow through it I will hold onto my positions. I believe there is more downside and I don't want to get shaken out of my SPY puts and VXX calls. Prepare for more downside. . .

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