TheSlayer's Market Thoughts

SPY June 7 2013

A continuation day leaves us right back in the middle of the uptrend channel. That everyone is watching this channel makes it a "Big Deal" when it gets violated. The normal breakout of the descending triangle to the downside ran into the immovable object of the bottom trendline - and, you know, we can't have that violated! That would be, I don't know, sacrilegious or something.

When the channel finally is violated with a confirmed breakdown, you can expect some wild selling, because that won't happen so long as people believe in QE. For now, we are in the same status quo as we have been in all year, now that we have the obligatory flush - also standard for this year - out of the way. Really, the only thing different this time was the fact that the upper channel trendline was violated first, making the standard drawdown to the bottom of the channel seem like a bigger swing than usual.

Bottom line, as we said yesterday, we still are looking for new highs, and blindly shorting this market except in special situations and for limited time periods is likely to hurt you. Am thinking 1700 eventually will be a minor barrier to be brushed aside as long as the Fed doesn't mess with QE and everything else stays relatively as it is. Summers are notorious for volatility, though, so we have to pay close attention.