If you look at the prices from last Friday's trade, we are only 5 points lower from where we were trading one week ago. It doesn't feel that way however. The sentiment has gotten much worse than a 5 point drop would indicate.
The market doesn't go up or down in a straight line. From SPX 1130 to 1040, we dropped 90 points in 2 1/2 weeks. That is a lot of ground that the market has covered. I expect to see some back and forth trading between ES 1040 and 1080 for the next couple of weeks. Once we build up some complacency again, we'll be ready to go down some more. September has a way of bringing out fear flashbacks in the stock market, especially one with memories of 2008 still fresh.
Monday will be light on important economic data so the bulls will have free reign to push up prices, perhaps to 1070 but starting from Tuesday and ending with the feared nonfarm payrolls on Friday, there is a lot of economic data that could be used as an excuse to sell the market. I expect us to revisit 1040 again next week.
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It has only been a few hours of upward movement, but the market feels a lot less oversold--maybe even edging back into overbought and excessively optimistic. Blind panic buying and covering.
There's a possibility we gap down on Monday. http://img837.imageshack.us/img837/4607/jh27.jpg
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