TheSlayer's Market Thoughts

SPY Daily chart August 22 2013

Thursday August 22 2013 was a wild day, with a huge bounce off of oversold conditions overnight that continued into the morning. After that, the market drifted higher throughout the afternoon, closing not far off the highs for the day. The Nasdaq was down for much of the afternoon with computer problems, but when it opened, it shot higher.

Some quick points:

First, we were talking about the importance of the 100-day moving average. Everybody out there is watching these major levels, so that is why we do. It can really make all the difference in your trading to keep track of these levels and play them. Of course, to play this bounce, you had to be watching and trading futures after hours last night; wait 'til this morning and you miss the party. General rule of thumb: first time you hit support (or resistance), it works. Second time, not so much, with lesser effect with each test.

Second, we scored a perfect touch and go on the 50% Fib level shown below. If you have key support such as the 50% Fib level and the 100-day moving average in roughly the same spot - that's good support.

Third: we closed the day right at the key resistance level that we've bumped up against several times this week, and that quickly sent the market reeling lower. Since this is the third or fourth test of the 1656 level of the futures, we need to watch it carefully for a break higher. You can call this the 50-day moving average resistance if you wish, too, it's in the vicinity.

Fourth: if we do crack higher through resistance, there is an air pocket above us. If the Bulls really get rolling, the futures could see 1680 before you know it. That's not a prediction, just an assessment of the lack of resistance above 1660.

Fifth: there was a huge amount of buying at the Closing Bell. That suggests that retail is hopping back on board after being scared earlier this week. Make of that what you will, retail has been right a lot this year.

That this market is confounding all sorts of knowledgeable people is beyond question. When insiders sell in droves, and the market bounces back - that's strength, baby. We are maintaining our quasi-Bullish stance simply because this market just takes a lickin' and keeps on tickin'. It should go down and it must go down - but it doesn't. We must play reality, not our hopes and feelings.

Don't assume that because you saw some knowledgeable pundit being all Bearish (or Bullish) for days or weeks, that they are going to remain that way under the circumstances we saw overnight. They'll change sides faster than you can say "Tom Sosnoff." You'll find out later that they switched sides when they're smiling and you're not. They are under no obligation to maintain a "foolish consistency," as Emerson would say. Keep the key support and resistance levels on your charts and respect them, everyone else does.

Below are a couple of charts to illustrate the points made above. I've had those fib levels on my charts for days, I think since some time last week. Notice how perfectly they worked.

Futures 4-hour chart August 22 2013

Futures daily chart August 22, 2013