UPTREND BROKEN

The 50 day MA was broken on the S&P 500 last Friday. This shows a significant break of the uptrend that started almost a year ago. The huge spike in the VIX on Friday shows the increase in the level of fear that the professionals are feeling right now. You need to pay attention to these signals and signs. The drop below the 50 day MA increases the possibility or probability that the trend is reversing. That break of support is a characteristic of a downtrend. The next key area of support is around the 1085 area on the S&P 500. If this gets broken, it could drop to about 1035 before it finds another support area. With the huge selling at the end of last week and the huge spike in the VIX, I expect a bounce on Monday...or at least early in the week. The next support area is 1085. We could get a rally off that area. It could be a huge rally. Look back on some of the trading days during the crash in the fall of 2008. There were 700 point drops that were followed by 400 point rallies. There was a 900 point rally on October 28th, 2008. All of those rallies set up bigger moves down as the crash continued. I'm not calling this latest move a crash. I am pointing out that there could be a fierce rally that just sets up for another move down. The spike in the VIX not only shows a spike in fear, it also shows a likely increase in volatility. We will likely get some huge swings in the upcoming days. For day traders, it will be a late Christmas present. For the inexperienced, it will provide an opportunity to get wiped out of the market...if you aren't careful. Take on a bearish bias these next few days (and possibly weeks). Look for rallies to buy puts. I will try to help with some of the blog postings. This does not mean that I won't still post bullish patterns. This latest sell off has caused many great uptrending patterns to pull back to great reward to risk positions. I will continue to trade great reward to risk trades. I was finally stopped out of SMH, but what a nice move down on HOG. These are both good examples of sticking to your trading plan. I made almost twice the money on HOG that I lost on SMH. That is how you grow your account.