Dropping the bomb

Today was one of those days you just cannot see coming from the charts.  Everything looked technically like it was set to go up today, at least a little.  When I got up this morning and looked at the charts, I thought that reactor in Japan must have exploded in a giant mushroom cloud overnight or something.  Instead it was S&P dropping their rating bomb on the market.  When all of the action is over in the first 90 seconds of trading like that, I don't see how you can make any money there.

Thankfully, the Dow recovered somewhat as the day went on and I finished being down "only" 0.75% instead of the 1.5% I had lost at the open. But that left us with a problematic candle.  Not quite a hammer, not quite a bearish engulfing pattern.  I've seen this a few times before and generally the next day is lower.  And indeed the futures are all lower now at 1 AM EDT by about a third of a percent.

The only thing I got right today was that the VIX indeed could go no lower and in fact gapped up at the open.  Even there though we ended up with this odd case of the VIX closing higher on a red candle.  In fact at 16.96, it is now smack back in the middle of its recent consolidation range.  But its indicators suggest more upside is possible at least in the short term.

Now that S&P put the kabosh on what should have been a developing upswing, I think another leg lower is not out of the question.  Note also that we closed below the 12,250 support level today and are now right back into the descending RTC channel from April 8th.  The next support is at 12,070, which is also the lower Bollinger band.  After that, there's no support until 11,615, the March 17th reactor/tsunami low.  I don't think we're going that low tomorrow, but it's not out of the question eventually.  In any event, I'm turning the swing trend arrow back to red.

I think part of the problem is that this is a holiday shortened week and also a school break.  I'm sure a lot of the Wall St. Byg Wygs are on vacation leaving the market to pretty much careen along on its own for a few days.  Right now the daily situation is too tough to call, but the weekly chart I mentioned yesterday is starting to look even worse. I have removed my long hat and I'm putting on my medium term short hat.  I'm definitely not liking the market for the next couple of weeks at least.