Indexes Testing Key Support, Yet Again.

Tuesday started off with a bang. Some bearish comments out of China (no, not a typo) was enough to send the markets down to the lowest close of 2010 and tested the all important 1040 support level in the S&P 500. While there was no real “news” out, it seems to have spooked investors for now. It kind of reminds me of an elephant being scared of a mouse at this point. Any mildly bearish news seems to be met with heavy selling.

I’ve been keeping my eye on the StockTwits stream, read several blogs and perused the mainstream media and realised something was missing, and it was fear. There was not nearly as much fear as I have seen during each big 2%+ drops in the market. It’s almost become a routine now to just let the bears have their way until they run out of steam and buy the dip. This routine also includes slapping the bulls in the face once they think they’ve made some real progress, followed by chopping around for several days at a time.

Who has time for deficit talks when England is down 1 to 4?Meanwhile, Europe is trying really hard to keep things quiet and stay out of the spotlight. This worries me because they would be the first ones to come out and talk about how much progress they are making towards “reducing their deficits, “stabalizing this” or “securing that”. Maybe I am just paranoid and they’re too busy watching the World Cup… On that note; one thing that I found hilarious from the news coverage of the G20 meetings this past weekend was the part when German Chancellor Angela Merkel and England’s Prime Minister David Cameron “skipped out of the discussions” to watch the Germany VS England soccer game. Keep up the good work!pic 4

Back to what’s important

S&P 500 Daily Chart

Here’s my read of the tape: Tuesday was more of the same kind of reaction to news we’ve seen several times over the past couple of months. The bears have not managed to impress me as they have barely crossed into new territory, however I’m less impressed by the bulls. I do believe that Wednesday will be a decisive day, whether for the bulls or the bears. If there will be sellers stepping in full force, it will have to be here.

This is a headline driven market, but the technicals are showing a divergence on the daily chart. Could be time for a real reversal, again.

Indexes Testing Key Support, Yet Again.