With today's decline the S&P closed back below support in the 1490 area. Now this level again becomes resistance. The S&P also broke the intermediate term up trend line on today's decline. I mentioned before that V shaped rallies are prone to failure and it looks like the odds are good that this one is going to fail. Amazingly enough the VTO signal from from Oct. 19th would have closed profitable on Dec. 6th. Not by much but it was a profitable trade.Let's just say I wouldn't be at all surprised if the Fed comes out and cuts another 1/4 point in the next week and the market trades back above resistance. Heck they can't seem to make up their mind what they are going to do from one week to the next. One week it's the economy is softening and they will need to cut aggressively. Then the next week they cut small and still seem worried about inflation (rightly so IMO. In the long term if they let inflation get out of control now it will do much more damage than the credit crunch) Keep in mind we still have positive seasonality through Dec. and many short term levels are already severely oversold. A bounce in the next day or two wouldn't be unexpected.
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