S&P500 has been moving in a narrow channel. This channel could be the missing piece of the puzzle. In my last post I talked bout possible formation of a massive bear flag. Bear flags are very bearish formation. As you see in the chart above the pink channel could be a bear flag. As long as S&P500 stays in pink channel we are going to be just fine, but if this channel get violated S&P500 should tank to 1050-1000. At this point I give 20%chance to violation of channel.
On the chart I point a down trend channel in blue color. As you see in the chart in last couple days there was 3 failed attempts to break out of the down trend channel, but every time it was un successful. You need to pay attention to 1175 as the most important support level. If S&P500 violates 1175 it would be very bearish. I believe we are in process to form a bottom, but due to European crisis. I’m not going to trust the market. I don’t have any long positions. I’m 100% cash. I don’t want to risk my money. I let others pick the bottom.
On the up side 1200 would be the psychological resistance but the real resistance will be 1228 level. Next 2 days will be very choppy. Let’s see what is going to play out by next Tuesday.