Pattern Watch

Taking a look at the /ES channel that we've been following, it didn't take long to retrace back to the lower trendline and I believe we're likely to see a bounce tomorrow from this level. I'm positioned fully long going into the session, but ready to add inverse ETF's on strength and certainly on any signs of weakness...


The 30 minute chart of the S&P shows prices near support at about 1087. A move back up to 1114 and a meeting with the declining 5 dma would present a great low risk opportunity to add to short positions. If 1087 fails to hold, there's very little support down to about 1035, which would represent a 10% correction and could be where this decline is ultimately headed in the short run...


Zooming in a little closer on the recent S&P price action and adding in the shorter term moving averages, one can see the value of watching price action on the 30 minute chart. Note prices finding resistance at the shortest term moving average (red) with brief pauses at horizontal support before resuming the downtrend. However, I want to point out that prices are stretched nearly 40 points from the declining 5 dma (brown). Rarely do prices get this extended without a snapback rally that I often refer to as "the regression to the mean trade"...


I closed my QID position on Friday for a quick 8% gain based on the following chart...

Of note, unlike the S&P and Nasdaq, the DOW closed below horizontal support and is currently the laggard of the three...

Looking at the chart of the UUP, the dollar has again found resistance at the fib retracement and has now printed a daily swing high (highlighted). Dollar weakness could certainly help the market's rebound efforts...

I have a few bounce candidates that may provide a quick pop in tomorrow's session. All are sitting on or near support making risk easy to manage...

BUCY - Trendline Support

CSKI - 50 DMA Support

MTL - Breakout Retest (Earnings on 1/26)

NIHD - Breakout Retest

TII - Anticipatory Spot on Ascending Triangle

Click Any Chart To Enlarge

CMG and IBN are also on my watchlist. I highlighted the breakout retest on CMG last week and it's still in a manageable spot. IBN is also at lower trendline support of a symmetrical triangle, which may present a good anticipatory position on strength.

I would not try to be a hero here and load up on the long side, as I think we have further downside to come, but the above present a few ideas for those who may want/need a little long exposure over the next couple of days.

That's all for tonight... off to watch the second half of the NFC Championship game!