May 6/10 Post Crash Analysis

Notes:
- In my opinion, the markets stopped function normally somewhere between 1143.5 and 1137.5.
- I think 1141-1143 was supposed to be the area where a reversal back up was supposed to occur before those HFT 'Bots really made a mess of things. Therefore, it makes logical sense that there will be trapped buyers waiting sell at those levels. However, any attempt to fade a rally up to those levels from current levels means that the mkt will have some good upwards momentum, and Newton's 2nd Law of motion applies here. Wide stops are needed, else stand aside.
- We are in an entrenched downtrend with a series of lower highs:
1216, 1206-1207, 1201-1202, 1173-1174, and 1164-1165

- If the downtrend is in place, then between 1164-1165 and 1143.5 is where I believe the next reversal and start of a move down to revisit the "scene of the crime" (ie. at least down to 1075) will occur.

- If Koolblue's projection about tomorrow (may7) being a turning point is correct, then we should see the market close above 1165, if not tomorrow, then by Monday, when all participants have had the weekend to digest all that has transpired.

- I've marked some areas w/ orange lines to highlight what I think will be reaction areas. I probably won't trade them tomorrow unless I first see some price leves being respected first. The most interesting one (to me) is the 50% retrace of today's drop (during RTH), which is 1110. The closest line I have to that is 1107.

- Today's close was 1122.75. I think there is a good chance that we visit that area at some point in tomorrow's RTH session. The gap fade may be my only play for tomorrow, if I decide to trade at all.


Feedback appreciated, add your thoughts to this thread.

- With all this mess happening in Europe - Moodys predicting a European banking meltdown, the sell off was no surprise if was led by GS, et. al.
But a 'crash' led by P&G? something obviously not right.

- I believe basing on the bearish price action of the last several days the market will eventually get to that "scene of the crime" level (1057), but not that sudden. (The chart looks like prices are being sucked in the outer space black hole!).

- Next move I think will be a period of consolidation.

I'm not trading tomorrow. remember fear is stronger then greed. markets might be irrational. Also, when there is fear, wide ranges, and craziness.....indicators will be off.

i'm still beating myself off for calling the stuff right on the down turn but not holding to it. if you recall the chart i showed on 4-28-10....i said if the markets were to drop it would be from there....the level was 1205.....i was short a good amount of contracts and since it sat at the level so long i second guessed myself and closed out the trade at midnight. i should have just believed it could happen and if it did there would be some distance to it and took a week vacation. i also made a couple other dumb moves......i closed out some puts yesterday that would have paid off huge today. i think watching the markets get bought up for so long effected my judgement and i thought they might get bought back up.

So needless to say i need to take some time away from the screen after missing out on some monster opportunities.

anyways...there will be more opportunities. good luck on your trading and be careful of the craziness.