Market Will Break Support Next Week – $182 Is Getting Weaker Each Time

Posted 9:30 AN ET - Yesterday the market tested support at $182. That level was breached and we bounced late in the day. This morning, we are seeing follow-through buying from that reversal. The selling pressure has been heavy this week and we will challenge SPY $182 with greater frequency. Eventually, that support level will fail and I believe it could happen next week. Global economic conditions are deteriorating and fear of a credit crisis is elevated. Sentiment is bearish and I don't see anything that is going to turn that around. These early rallies have a tendency to falter. I will be looking for shorting opportunities in the first hour of trading. Once the rally stalls, I will short stocks that are breaking below horizontal support. If the market finds a bid and the damage is contained, I will start trading from the long side. Conditions change rapidly intraday and you have to stay flexible. I am not taking any overnight positions. The market could swing either way at this juncture. I don't like selling bullish put spreads or bearish call spreads at this time. From a swing trading perspective, the best scenario would be a rally back to SPY $187.50. That resistance level would represent a shorting opportunity. I would sell bullish call spreads at that level and I would purchase puts. Janet Yellen's testimony before Congress got us to that level very briefly and the selling commenced as soon as she started speaking. Central banks are out of bullets and this economic cycle will have to run its course. The early rally today will stall. Favor the downside early. Look for more selling next week. . .

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