Quite A Nasty Down Day Today

If you are looking for something positive about the market action today, you're going to have to look a long time. It doesn't get much more dismal than this. What made it particularly discouraging was that almost everyone was expecting a pretty good jobs headline. The bears were going to question the validity of the good report, but the report was so poor that they didn't even have to point out the flaws. The report was terrible, and then we had the added insult of being told by the president how good it was.

After the gap down, we briefly attempted to stabilize in the first 30 minutes of trading but then it was straight down all day. Volume wasn't particularly heavy, but it was enough to make for a technical distribution day, which more than negates the minor technical follow-through in the Nasdaq we had on Wednesday.

We have now had two major failures in the S&P 500 since the top in April. In early May we failed right at the 50-day simple moving average around 1174, and now we have failed right at 1106, the 200-day simple moving average. Unfortunately there just isn't much support left, especially if we break 1050. If you look at the charts of the major indices over the past year or so, it's rather troubling to see how much air there is under our current level. This market went straight up for a very long time without much consolidation, and that makes for scant support as we roll over.

There may not be much choice here but to take a defensive stance. I'm sure some pundits will be looking to call a bottom next week, but this is a market that you shouldn't trust until it proves itself. It failed miserably at taking out key resistance this week, and we can't just dismiss that fact. The bears are in control and the bulls have the burden of proof.

Even if you think there may be reasons to be positive about this market, the trend is going the other way and we shouldn't fight it. Trends almost always go further and last longer than we think is reasonable, and there is no question now that we are in a downtrend.

Great opportunities, like C at 3.80, are arising out of this mess, so don't get discouraged. Cut your losses and protect your capital -- we will finds some profits down the road.

long C