Where do we go from here?

Monday’s drop leaves us in an interesting position and the possible start of another few days to the downside. The market opened higher, but the dollar moved higher, causing commodities to drop and pushing the markets lower. The bank failures are not helping matters either, but the government seems to have that somewhat under control. So, where does the market go from here? We have seen an amazing rally since mid-March, with a small pullback in July. Since July, the market has moved straight up without much of a pullback. Monday’s drop puts us into a position where we could see another leg down. You can see we broke old support on the SPY at $108, to close at $106.91. If you look on our chart below, you will see there is room to drop down to the $104 level, which is the bottom of the short-term trend line. Saying all of this, you have to realize that every time the market wants to drop, buyers come in and push it higher. The market also knows that the government is there to prop up our economy, which is also making it very hard to short.

Tuesday will be very interesting and we could start to see some cracks in this rally. Of course, I would not be surprised to see the market rally and end the day much higher.

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Mickey Welcher is President of Spectral Asset Management LLC and works with Today Trader. He has extensive trading experience and money management for clients. If you have any questions, please contact him at mickey@todaytrader.com