Big news of the day is that the Dow tested the Novemeber intraday low (7449) - touching 7447 briefly before making a half-hearted attempt at a rally that didn't go anywhere. Here's a chart:
Dow 5 Minute Chart
The big moment came at around 3:40. There was an immediate reaction and bounce up that hit resistance at the trend line and immediately gave up the ghost, closing at a disappointing 7466 - much closer to the low than the rebound high. The S&P moved pretty much the same way, although higher than it's November intraday low than the Dow was, it never came close, closing at 778.98 after hitting a low for this down leg of 777.03.
While the Dow "retest" held, and we can now label a support area of Dow 7447-49, it was extremely disappointing for the bulls in that the world didn't say "Hey, the support held, let's jump in and start a big rally!" Instead, the Dow is remains dangerously close to a range boundary area below which is generally considered to be free of any ready support for quite a ways down. If this doesn't hold further, the floodgates may open.
My current system is very simple - follow the trends of the major indices and play the financial inverse ETFs (SKF or FAZ) when the market is in a downtrend, and play the normal financial ETFs (UYG or FAS) when the market is in an uptrend. Since the Dow hit a support area and bounced up, the reasonable move was to assume that the current downtrend is over and await further developments. As it was, my FAZ stake made another 13% today before I sold at 70 shortly after the Dow retest. It probably was a premature move, and I will put up a post soon showing similar bounces off of support where the market made a rocket rebound and a quick switch from FAZ to FAS to take advantage of the bounce was extremely profitable. The fact that the market did not act in similar fashion today after hitting support does not bode well for the bullish play.
So I will keep an eye on the Futures overnight to get some clues as to which way the market will go from here and which side to go back in on. The post-retest bounced failed at 7517 - a level that has acted as support/resistance several times this week. I would not consider going in on the long side unless the Dow convincingly passes this level and the play would be UYG/FAS.
Dow 15 Minute Chart
I wouldn't go in on the bear side unless the Dow significantly breaches the retest support level (rememeber, what was support coming down will be resistance going up) and then the play would be back into SKF/FAZ.
Maybe the market is waiting for the S&P to join the Dow in the retest before a rebound begins. Maybe everyone will be spooked and everything will plunge. Either way, from this point there could be a big move either up or down
Later.