S&P to 1220 now...
The liquidity crisis is not over, whatever people may say. My top evidence is unexpected, yet strikingly clear. Gold -$45 an ounce today, Silver -$1.20 an ounce, Wheat lock limit down, Oil -$4 a barrel. Why are these things blowing up when they should be rising weak dollar=strong commodities, right? Wrong in this case, the hedge funds are running low on cash as banks tighten up and bring cash home. Hedge funds are coming unleveraged and commodities--the current bubble--are popping. Of course, as liquidity dries up again, the pop of yesterday fell apart, and we lost 300 points of the 420 point (pothead rally).
The S&P had been trying to set up a triple bottom, with lows at 1270 in mid January and early March. Last week, the S&P heading almost 10 handles below 1270, thus breaking support and invalidating the triple bottom. Now that the latest upwave is over, we look for the next downside target which is the next support. Since 1270 is gone, and we are unlikely to form a quadruple bottom at 1260 as these are quite rare, we are probably headed to 1220. This is still 70 points down from here. It isn't too late to short. While we are down 300 today on the Dow (32 handles on the S&P) there are still 70 handles of downside left. It is safe to short now, and safe to short all the way down to the break of the 1270 level... under 1250, entries favour the bullish side, as 1220 will hold unless another bank (cough Morgan Stanley) fails.
If you held gold or oil through the massive trendline breaks--bail now. The fundamentals don't support these lofty valuations--as cash dries up and the economy falls further, investment demand (not commodity demand) for these goods will drop sharply. A bankrupt hedge fund isn't buying silver futures.