In the May 13th email on the $ index, affirmed the bearish view (short from the April 27th sell at 85.60), and the market has continued lower since, today breaking below the May 13th low at 81.90, and to levels not seen since Jan. With no signs of even a short term bottom “pattern-wise” and technicals that remain negative (macd still in sell mode, see bottom of daily chart below), further downside toward the long held target at 80.10/20 (50% from the March 2008 low at 70.70, a retracement that tends to work well in this market) and possibly below is favored ahead, and want to stay short. Had been using a close above the bearish trendline from late April as a stop, and though the market temporarily spiked above there last week, it did not close above. So for now, would still use a close above the bearish trendline from late April, but incorporating that spike (currently at 82.80) as a sign to stop. However, will want to get even more aggressive with the stop on signs of a near term bottoming (slowing downside momentum, etc.), and especially on approach of the 80.10/20 area. Nearby support is seen at the base of the multi-week bearish channel (currently at 80.70).
Longer term, the view over the last 5-6 months of an extended period of wide ranging remains in place. Within this scenario, and after the sharp declines over the last few months and the market approaching important support at 80.10/20 (see shorter term above) then the base of the bullish channel from late Oct (currently at 79.25), there is unlikely to be a large tumble from here (more likely to see a decent sized bounce from lower levels). At this point however, at least some further downside is expected. So for now, would maintain the longer term bearish bias (switched to the bearish side on the early March “false break” of the Nov high at 88.45), but will be looking for signs of a potentially important low on approach of the 80.10 area. Note that this will keep the longer term bias on the bearish side (at least for now) just in case the market does indeed accelerate to the downside from here (though not currently favored).
