After the opening moderate gap higher (above the bear flag on the hourly charts no less!), the market saw a swift reversal, and some reasonable declines to end the day.
Certainly, today was NOT a massive victory for the bears, but it was again some progress towards breaking what are giant bear flags on all the major indexes.
A pretty impressive bearish formation is clearly visible on all the daily index charts. We have a giant bear flag - the wave'2, and its just a matter of time before it breaks, and that will open the door to much lower levels.
However, there is still the small (and very annoying) possibility, that we will bounce off the lower channel line for one final minor wave up - which may or may not put in a slightly higher high >1374 - somewhere in the 1375/90 range. I really don't know, no one does of course.
What IS clear, a close below 1330 tomorrow, or any day after, will be VERY bearish, and will probably remove the threat of such a final minor wave higher.
The good bears need to be careful tomorrow morning if we gap lower to around 1330..and then reverse..hard.
The Tranny - bearish
The big 5k level looks set to be broken either tomorrow or Thursday. The channel floor is around 5025..so if we see <5000, then the tranny is warning that 'its over bulls, at least for a few weeks'.
Reading around, and talking with other traders today, it looks like many are agreed Sp'1225/00 seems a fairly reasonable target within the next 2-3 weeks. The next FOMC (urghh, yeah, that again) is August'1st, so if we're around 1200 at the end of July, I'll likely sit in cash until we see what the Bernanke has to say.
A little more later.