ALL EYES ON 1040

We are watching the 1040 area in the S&P 500 very carefully. If we break below this low, we should start to fall very quickly. The market managed to rally up a bit at the close, but a closer look (15 minute chart) shows a picture perfect bearish ABC pattern that formed with today's price action. This would suggest that we could start selling off tomorrow...if that does end up being a bearish ABC pattern. There is still a possibility that we could continue to chop sideways a bit longer, but each failed rally gives the bears more confidence. I think if we reverse today's late session rally early in tomorrow's trading, we will start to see some huge panic selling. There are tons of head and shoulder patterns developing in the market place. I still think RST has more downside left in it. I might be a bit early, but I like put options on AEM. I think gold is very near a top, but it might have one more push up. The pattern on AEM would suggest that it has already reached its top and should start to move down. You could wait for a move below its 10 day EMA as confirmation. Look at August expiration to give yourself enough time in case I'm early on the pick. There are so many individual stocks that are at a support area. If the S&P 500 breaks 1040, most of these stocks will break their support and we could see a "flash crash 2" as computer programs start to trigger sell orders and stop orders. If you already know how to use a contingent order, now would be the time to use it. At the time of this posting, the China markets were up about 1% and the European markets were also up around 1%. Japan was down about 1%. If the European markets hold on to this rally, we could see the U.S. markets open higher. That will be fine because we won't look to add to the positions unless the 1040 support area is broken.