The market continues to demonstrate exactly how weak is has become as even the slightest amount of buying is met quickly by selling and does not allow anything to hold on the rally side.
Odds favor a decent rally Thursday as on the ultra short term basis the market has become quite oversold and in need of some type of relief rally. After this rally has terminated however we can expect more of the same as the market moves ever so closer to its lows at 1260 on the S&P 500.
Aggressive traders can look to buy calls for this counter trend rally as it should be in the neighborhood of 20 or so S&P 500 points. I am looking for a target of 1390 on the cash S&P 500 before we swing back into selling mode. This play on the long side is very aggressive so care needs to be taken should you decide to go this way.
More conservative short term traders can wait for the 1390 target area on the S&P 500 cash and then get back in on the short side for what could prove to be a very dynamic move lower.
Intermediate and Long term traders need to remain very cautious with a very low allocation to stocks and a very defensive posture. We will know more on this time frame once we see what the market does when it approaches the lows. For now, treat this market as a bear market and use strength to sell into.