Swing Trading Strategies & Stock Picks Since 2003

SHORT TERM: SPX breaks 1000 as selling continues, DOW -508

Overnight the Asian markets were mostly lower as Australia cut rates 1.0%. Europe opened higher and closed mixed. US index futures were higher overnight and remained higher despite the disappointing news from BAC.

At 9:00 the FED announced that is was going into the commercial paper business with a new program CPFF: http://www.federalreserve.gov/newsevents/press/monetary/20081007c.htm. At the open stocks moved higher and rallied to SPX 1073 in the opening minutes. That was the high for the day. A pullback to 1048 followed by 10:00, and then another rally attempt to get above 1061 again. It failed to move higher after SPX 1063. After that is was downhill for the rest of the day. At 1:00 FED chairman Bernanke's speech was released: http://www.federalreserve.gov/newsevents/speech/bernanke20081007a.htm. The market bounced a bit but turned right over again. At 2:00 the FOMC minutes were released: http://www.federalreserve.gov/monetarypolicy/fomcminutes20080916.htm. The market made a low at SPX 1014 and rallied to 1035 by 2:30. It was then reported that the UK was finalizing a plan to bailout four of the nations troubled banks: RBS, BARC, HBOS and LLOY. The market turned over again on that news and the selling continued into the close as the financial sector XLF started making new bear market lows. At the close the SPX/DOW were down 5.40%, and the NDX/NAZ were down 5.80%. Bonds were down 25 ticks, Crude rose $1.25, Gold gained $22.00, and the Euro was higher. Support for the SPX drops down to 990 and then 961, with resistance at 1018 and then 1031. Short term momentum is oversold with another positive divergence, and the near term indicators remain extremely oversold. Tomorrow Pending home sales at 10:00.

Posted earlier today a potential long term alternate count that could possibly define what is occurring in the markets today. The DOW immediately responded by running right into that 68% bull market retracement level nearing the close. Should this market continue lower we could be dealing with a whole different kind of bear market. SPX 1061 is an important long term support level. This was the low of Primary wave IV in 2004. With the break of this level yesterday, and the follow through today, the SPX is now trading at levels not seen since 2003. The next important support level is at SPX 961. It's treacherous market, best to your trading!

MEDIUM TERM: downtrend hits a new low at SPX 996

LONG TERM: bear market still unfolding

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987